author: JUSTICE SULLIVAN

text:
    ROTARY CLUB OF CHICAGO, Plaintiff-Appellee, v. HARRY F. SHEA & COMPANY et al., Defendants-Appellants.
    First District (5th Division)
    No. 83—2178
    Opinion filed December 23, 1983.

      William M. Getzoff, of Chicago, for appellants.
    Seyfarth, Shaw, Fairweather & Geraldson, of Chicago (Raymond J. Kelly and Joan M. Gale, of counsel), for appellee.
   JUSTICE SULLIVAN

delivered the opinion of the court:

This action was brought by Rotary Cub of Chicago (the Club) seeking a declaration that its last annual election of officers and directors is binding and valid and an order enjoining defendants from proceeding with a second election and prohibiting defendant Byron M. Getzoff (Getzoff) from continuing to hold himself out as president of the Club. A temporary restraining order was entered prohibiting defendants from counting the ballots of the second election, and their motion to dissolve that order was denied. Thereafter, a preliminary injunction was entered ordering that the sealed, uncounted ballots remain in the court’s custody and that Getzoff be enjoined from holding himself out as president. In this interlocutory appeal, pursuant to Supreme Court Rule 307 (87 Ill. 2d R. 307), defendants contend that the trial court abused its discretion in (a) failing to grant their motion to reconsider its refusal to dissolve the temporary restraining order; and (b) entering the preliminary injunction.

The facts of this case are largely undisputed and establish that the Club held its annual election of officers and directors on April 5, 1983 (the April election). Prior to the election, the Club’s nominating committee presented a slate of officers and directors which included the nomination of then president-elect Norman Kloker (Kloker) for president. Two alternate slates were presented by Club members pursuant to the procedures prescribed in the Club’s bylaws. One slate nominated Gary Mann for president, but otherwise duplicated the nominating committee’s slate; the other put forth entirely different nominees for each office, but did not contain a nomination for president. The ballot sent to the membership listed the candidates for each office in alphabetical order under the designation of the office for which they were nominated. The reverse side of the ballot contained a statement that “[i]n accordance with the by-laws the following nominations have been duly made and are hereby certified under their respective Articles,” and a listing of the three slates with the designations “NOMINATING COMMITTEE SLATE” appearing above one slate and “NOMINATIONS BY MEMBERS” appearing above the others. After these ballots were counted, Gary Mann was declared the newly-elected president of the Club; the other officers and directors elected were those nominated by the nominating committee and one group of members.

Shortly after the April election, Kloker and another member filed a protest with the Club’s rules committee on the ground that inclusion of the three slates and a designation of their origin on the reverse side of the ballot was contrary to the bylaws. The rules committee found the April election valid, and the protest was taken to the Board of Directors (the Board), which also rejected the protests and declared the April election valid. An appeal of that decision was filed on April 27, 1983, pursuant to Article III, section 2(b) of the Club’s bylaws, which provides in pertinent part:

“Appeal from any decision of the Board of Directors *** shall be made in writing to both the President and the Executive Secretary *** within fifteen days from the date of such decision. Notice of such appeal shall be given the members of the Club forthwith by the Executive Secretary and such appeal shall be acted upon not later than the second meeting of the Club following the expiration of the time specified for appeal.”

It appears from minutes of a Board meeting held on June 20, 1983, that two appeals were filed challenging the election, although it is unclear when the second appeal was filed or what it concerned. However, it is undisputed that no notice of appeal was sent to the members, nor was an appeal brought before a meeting of the members as prescribed in the bylaws. Instead, the Board appointed an ad hoc committee which was apparently charged with reviewing the election procedures and conducting negotiations with the members presenting the appeals. Getzoff testified that the Board directed the executive secretary to take no action concerning “the appeal” pending a report of that committee, but he did not state whether he was referring to one or both appeals.

On June 14, 1983, Getzoff — then president of the Club — announced at the regularly-scheduled weekly luncheon meeting that a discussion of the April election would be held at the next weekly meeting on June 21 (the June 21 meeting). On June 20, the ad hoc committee reported to the Board that, in its opinion, the election was valid. The Board then voted to disallow both appeals, and directed Getzoff “to cancel the members only meeting on June 21st by direction of the Board of Directors” because the meeting was not called by the Board and proper notice thereof had not been given to the membership.

During the June 21 meeting, Getzoff announced that he had been directed to cancel the discussion. A motion was made from the floor and seconded that the members proceed with the discussion and, after being advised by the parliamentarian that the motion was in order, Getzoff put the question to a vote and it carried by an unreported margin. Getzoff then asked that all nonmembers leave, although it appears that some nonmembers may have remained throughout the subsequent discussion and voting. The members present then debated the propriety of the April election and approved, by a vote of 130 to 80, a resolution declaring the April election invalid and calling for a new election. Getzoff announced that he would remain in office until his successor was elected, and that a new election would be held within 30 days (the special election).

At a Board meeting later that day, the members of the Board expressed their displeasure at Getzoff s failure to follow their directive and their feeling that the action taken by the members was improper, but no action was taken other than a decision to include biographical data on the candidates when a special election ballot was sent. However, at a June 30 meeting, the Board affirmed its ruling that the April election was valid, declared that the officers and directors elected on that date would assume office as scheduled on July 1, 1983, and stated “that any attempted action of the members during the business portion of the [June 21 meeting] without proper notice to all members of the [Club], [was] null and void and in direct violation of the Constitution and by-laws of the [Club] and the laws of the State of Illinois.” All members were advised by letter of these actions, and the executive secretary was instructed to disregard the resolution calling for a special election.

Thereafter, Getzoff established a three-member committee to proceed with the special election, and Harry F. Shea & Company (Shea), a certified public accounting firm, was engaged to supervise the balloting. Shea was given a roster of members and sent a packet of voting materials to each of the members listed therein. Among those materials were a ballot identical to the ballot provided for the April election (including two nominees for the office of president), but without the list of slates on the reverse side; a signature card; envelopes for sealing the ballot and returning it; a copy of the section of the bylaws concerning elections; and a letter signed by Getzoff as president and dated July 15, 1983. Getzoff explained therein what had occurred at the June 21 meeting and the June 30 Board meeting, that ballots were to be returned to Shea by July 25 and that the opening and counting of the ballots would be supervised by the special election committee, but two members of the Club’s rules committee would be invited to participate. New officers and directors were to take office on August 1.

On July 22, 1983, the Club filed the instant action seeking decía-ration that the April election was valid and an order restraining the opening and .counting of ballots from the special election and prohibiting Getzoff from holding himself out as president. A temporary restraining order was entered on that date enjoining any further proceedings with regard to the special election and directing that the sealed ballots be delivered to the court. Defendants moved to dissolve the order, arguing that the action was not authorized by the Board and that the verified complaint filed in support thereof contained knowingly false statements of material facts. At a hearing on the motion, Getzoff conceded that the special election did not comply with all of the requirements of the bylaws, explaining that, under the circumstances, strict compliance therewith was impossible. The motion was denied, as was a later motion to reconsider, and the trial court granted the Club’s petition for a preliminary injunction, ordering that the ballots remain in the court’s custody and enjoining Getzoff from acting as president of the Club “during the tenure of the current President Gary Mann’s term of office.” This appeal followed.

Opinion

Defendants first contend that the trial court abused its discretion in refusing to either dismiss the complaint with prejudice or dissolve the temporary restraining order, maintaining that the verified complaint upon which entry of the temporary restraining order was based contained perjury. In that complaint, the Club stated that the voting at the June 21 meeting “was improper in that non-members were not asked to leave and some of them were observed voting.” The complaint was verified by a director and the executive secretary of the Club, who stated that they had personal knowledge of the matters contained therein and the facts stated were true. However, at a hearing on the motion to dissolve, both testified that while no announcement was made prior to the vote on the motion to hold the discussion, Getzoff did ask nonmembers to leave prior to discussing and voting on the resolution to declare the April election invalid. The executive secretary further stated that he had heard that nonmembers were present during the later voting, but had no personal knowledge of the fact; while the director testified that he saw nonmembers present at that stage of the proceedings, but his statement that they had voted was based on hearsay. The trial court ordered the above sentence stricken from the complaint, but denied the motion to dissolve -the temporary restraining order, finding that the facts stated therein were not material to the entry of that order. It is defendant’s position here that the action taken by the trial court was insufficient; in effect, they argue that the court should have dismissed the entire complaint with prejudice or, in the alternative, dissolved the temporary restraining order.

Initially, it is our view that the question whether the trial court abused its discretion in refusing to dissolve the temporary restraining order is moot. As defendants concede, that order has merged with the preliminary injunction and, while a temporary restraining order is appealable under Rule 307 (Bohn Aluminum & Brass Co. v. Barker (1973), 55 Ill. 2d 177, 303 N.E.2d 1), we have held that where the temporary restraining order has expired, and the record does not indicate the possibility that defendant would suffer compensable damages in the event that order was wrongfully issued, any questions raised by the refusal to dissolve the temporary restraining order were moot because reversal thereof could have no practical effect on the controversy {City of Chicago v. Airline Canteen Service, Inc. (1978), 64 Ill. App. 3d 417, 380 N.E.2d 1106). Similarly here, since the temporary restraining order has merged with the preliminary injunction and because it does not appear from the record that any compensable damages may have been suffered, reversal of the trial court’s denial of the motion to reconsider its refusal to dissolve the temporary restraining order would not have any practical effect on the controversy.

Defendants do not argue that verification of the facts in question influenced the entry of the preliminary injunction, nor does it appear that such was the case, since that portion of the complaint was stricken prior to entry thereof. The only argument raised with regard to the preliminary injunction is that, instead of granting the injunction, the trial court should have “denied any relief”; i.e., it should have dismissed the complaint with prejudice because the Club came before the court with “unclean hands.” However, assuming that the motion to dissolve and the argument made thereon may be considered a motion to dismiss, we believe that this question is not properly before us on an interlocutory appeal pursuant to Supreme Court Rule 307. The refusal to dismiss a complaint is not subject to interlocutory appeal, for it is neither a final order appealable pursuant to Supreme Court Rules 301 or 304 (87 Bl. 2d Rules 301, 304; see Camp v. Chicago Transit Authority (1980), 82 Ill. App. 3d 1107, 403 N.E.2d 704) nor is it appealable under any of the exceptions set forth in Rule 307 (see People ex rel. Fahner v. Community Hospital (1982), 108 Ill. App. 3d 1051, 440 N.E.2d 200). Therefore, since the issue is not properly before us, we will not consider this contention of defendants.

Defendants next contend that the trial court erred in entering the preliminary injunction. They acknowledge that the issuance thereof is within the discretion of the trial court (S & F Corp. v. American Express Co. (1978), 60 Ill. App. 3d 824, 377 N.E.2d 73) and that the sole question before us on an interlocutory appeal is whether that discretion has been abused (Baal v. McDonald’s Corp. (1981), 97 Ill. App. 3d 495, 422 N.E.2d 1166), but assert that such abuse has occurred in the instant case.

The party seeking a preliminary injunction must establish by a preponderance of the evidence that it is entitled to that remedy by showing that (1) it has a clearly ascertained right which must be protected; (2) it will be irreparably injured in the absence of that protection; (3) it has no adequate remedy at law; and (4) it is likely to be successful on the merits. (Cross Word Products, Inc. v. Suter (1981), 97 Ill. App. 3d 282, 422 N.E.2d 953.) In the instant action, defendants first assert that because the trial court refused the Club’s request to include a finding that the April election was valid and binding in its order granting the preliminary injunction, the Club has failed to show that it has any rights in need of protection or that it is likely to succeed on the merits. In effect, they argue that the trial court had to decide the merits of the action prior to granting any preliminary relief. We disagree.

In considering the propriety of a preliminary injunction to preserve the status quo pending a final decision on the merits, the trial court does not decide contested issues of fact (City of Chicago v. Airline Canteen Service, Inc. (1978), 64 Ill. App. 3d 417, 380 N.E.2d 1106) nor decide the merits of the action (Baal v. McDonald’s Corp. (1981), 97 Ill. App. 3d 495, 422 N.E.2d 1166), and in reviewing its decision, we will consider the substantive issues only to the extent necessary to determine whether the trial court has abused its discretion (Oscar George Electric Co. v. Metropolitan Fair & Exposition Authority (1982), 104 Ill. App. 3d 957, 433 N.E.2d 958). Furthermore, the party seeking an injunction need not “make out a case which in all events will warrant relief in the final hearing.” (People ex rel. Fahner v. Community Hospital (1982), 108 Ill. App. 3d 1051, 1057, 440 N.E.2d 200, 205.) “All that is necessary is that the petitioning party raise a fair question as to the existence of the right claimed, lead the court to believe that he probably will be entitled to the relief prayed for if the proof should sustain his allegations, and make it appear advisable that the position of the parties should stay as they are until the court has had an opportunity to consider the case on the merits” (Baal v. McDonald’s Corp. (1981), 97 Ill. App. 3d 495, 500, 422 N.E.2d 1166, 1171), and our sole concern is whether there was a sufficient showing on these questions to sustain the trial court’s order (City of Chicago v. Airline Canteen Service, Inc.).

Defendants maintain that in the absence of a declaration that the April election was valid, the officers and directors elected at that time are merely de facto officers and have no rights to be protected and thus are not likely to succeed on the merits, relying on Waterman v. Chicago & Iowa R.R. Co. (1892), 139 Ill. 658, 29 N.E. 689. However, we believe that Waterman provides no support for their position. In that case, an officer of a corporation sought to recover salary for the two years during which he acted as president. The court found that he was not entitled to the relief requested because the board of directors which elected him “was neither a de jure nor a de facto board” (139 Ill. 658, 668, 29 N.E. 689, 692), because their own election was improper and they had never controlled the corporation; therefore, it reasoned, the officer in question never became the rightful president. However, it went on to note that “a certificate of election, commission, or other evidence, may be, under some circumstances, prima facie or even conclusive evidence of a de jure right.” (139 Ill. 658, 669, 29 N.E. 689, 692.) In the instant case, the election in question has been declared valid by the Club’s rules committee, pursuant to its duty under section 28 of the Club’s Manual of Operating Rules and Procedures to act as the judge of elections, and its decision has been affirmed on appeal to the Board pursuant to its duties under the Club’s constitutions and bylaws to manage the Club and to act as a board of appeals from all committee actions. No question having been raised as to the de jure status of that Board, we believe that their action served to certify the election and is evidence of its validity. The trial court, in refusing to declare the election valid before hearing more evidence, apparently considered the Board’s action prima facie rather than conclusive evidence of the election’s validity, and it is our view that the above showing was sufficient to sustain the court’s order.

Defendants posit, however, that further evidence on that question is unnecessary, and the court therefore should have ruled “as a matter of law” that the election was invalid. They assert that the ballot was clearly improper because (a) the bylaws are “ambiguous” regarding whether the office of president-elect is an elective office, and the court therefore should have ruled that it is not, and (b) it can be “implied” from the bylaws that a listing of the slates on the reverse side of the ballot is improper. However, we have read the bylaws and believe that they are, at best, ambiguous on both points, and the trial court properly refused to rule on their validity prior to hearing further evidence. Furthermore, it appears that should the trial court find that the Club’s interpretation of the bylaws on this question is correct, it would be entitled to all of the relief requested. Such a showing is sufficient to sustain the court’s entry of a preliminary injunction.

Nevertheless, defendants further argue that the election was declared invalid by the membership during the June 21 meeting; therefore, they assert, Getzoff remained as president, and the special election was proper. However, we believe that the evidence before the court established that the action taken on June 21 was contrary to the bylaws and therefore did not constitute a declaration that the April election was invalid. Once the Board declared the election valid, the only method provided under the Club’s bylaws to overturn that decision was an appeal to the membership. Article III, section 2(a) of the bylaws provides that “on such appeal the decision appealed from shall be reversed only by two-thirds vote of the members present and voting *** notice of such appeal having been given by the Executive Secretary to all members of the club at least thirty days in advance of such meeting.” Defendants concede that no notice was given to the entire membership, and that the motion presented at the June 21 meeting did not receive two-thirds of the votes of the members present and voting, but they maintain that the action taken was not an appeal, arguing that under Robert’s Rules of Order the membership acts as the judge of any questions regarding an election. Therefore, they assert, the notice requirement was inapplicable, and a majority vote was sufficient to sustain the motion. However, article VI, section 12 of the Club’s bylaws provides that “[t]he proceedings of [the Club] and of its directors and its committees shall be governed by and conducted according to the latest edition of Robert’s Manual of Parliamentary Rules, except as otherwise provided herein, or by a rule or manual of rules adopted by the Board of Directors.” The Club’s Manual of Operating Rules and Procedures provides that the rules committee “shall act as the Judge of Elections at all elections,” and the sole method of reviewing that committee’s actions is by an appeal to the Board, followed by an appeal to the membership. Since the procedures outlined in the bylaws were not followed, the Board’s decision has never been declared invalid.

Furthermore, it is no answer, as defendants alternatively argue, that they had no choice but to proceed as they did, in violation of the bylaws, because the Board improperly frustrated the appeal to the membership. The bylaws are binding on the members as well as on the officers of the organization (Board of Trade v. Nelson (1896), 162 Ill. 431, 44 N.E. Z43), for they are in the nature of a contract between the corporation and its members (Norris v. South Shore Chamber of Commerce (1981), 98 Ill. App. 3d 32, 424 N.E .2d 76). Thus, the members’ recourse in the instant case was to compel the Board to comply with the bylaws regarding appeals, not to violate those bylaws themselves.

Finally, defendants contend that the Club failed to show irreparable injury justifying issuance of a preliminary injunction. The standard to be applied is whether “the remedy at law is inadequate in that monetary damages will not adequately compensate plaintiff or cannot be measured by pecuniary standards.” (Bally Manufacturing Corp. v. JS&A Group, Inc. (1980), 88 Ill. App. 3d 87, 94, 410 N.E.2d 321.) In the instant case, Getzoff’s actions in holding himself out as president and improperly proceeding with the special election cast doubt on the validity of the decisions and actions of the present directors and officers. In addition, according to the Club, his actions have caused disruption and confusion among the membership. Clearly, such damage is of a continuing nature and cannot be measured by pecuniary standards; injunctive relief is therefore the only means by which the injury can be redressed.

For the foregoing reasons, the order of the trial court is affirmed.

Affirmed.

LORENZ and MEJDA, JJ., concur.


source: Caselaw Access Project

author: PRESIDING JUSTICE BUCKLEY

license: Public Domain

text:
    KERR STEAMSHIP COMPANY et al., Plaintiffs-Appellants, v. CHICAGO TITLE & TRUST COMPANY, Trustee, et al., Defendants-Appellees.
    First District (1st Division)
    No. 82—2384
    Opinion filed December 27, 1983.

      Thomas W. Johnston, Richard D. Worsek, and Margaret E Woulfe, all of Chadwell & Kayser, Ltd., of Chicago, for appellant Data General Corporation.

      Altheimer & Gray, of Chicago (Robert K. Blain, of counsel), for appellant Kerr Steamship Company.
    Robert M. Tarnoff, Leonard A. Nelson, and Janice G. Janser, all of Schoenberg, Fisher & Newman, Ltd., of Chicago, for appellees.
   PRESIDING JUSTICE BUCKLEY

delivered the opinion of the court:

The instant appeal arises out of a complaint for declaratory judgment brought by plaintiffs, Kerr Steamship Company (Kerr) and Data General Corporation (Data General), tenant and subtenant, respectively, of certain office space leased by defendants, Chicago Title & Trust Company (CT&T) and Fleetwood Realty Corporation (Fleet-wood). The complaint sought a construction of the lease language pertaining to plaintiffs’ additional rental obligation and a refund of additional rental plaintiffs alleged they were overcharged. Defendants filed a motion to dismiss with an alternative motion to strike. The trial court entered an order granting the motion to dismiss, and it is from this order that plaintiffs now appeal. We reverse and remand.

The record reflects as follows. On September 26, 1973, Kerr entered into a lease with defendants whereby Kerr agreed to rent 3,587 square feet of space in an office building at 200 West Monroe Street in Chicago. CT&T, as land trustee, was named as lessor under the lease, but Fleetwood was, and continues to be, the managing agent for the beneficiaries of the trust. The lease is a standard form, with various names, dates, dollar amounts and other descriptions applying to the demised premises typed in. Paragraph 4 of the lease is headed “BASE RENTAL” and provides for an annual rental of $29,234,05, payable in the amount of $2,436.17 per month. Paragraph 5 of the lease is headed “ADDITIONAL RENTAL” and provides that in addition to the fixed annual rental the tenant agrees to pay its pro rata share of certain building costs; the additional rental is to be determined pursuant to a formula reflecting increases in operating costs and taxes during subsequent lease years, compared with such costs and taxes in the base year, which is the first lease year. Specifically, paragraph 5A of the lease provides in pertinent part:

“The Tenant hereby agrees to pay as additional rent ‘Tenant’s Prorata Share’ of the amount by which yearly ‘Building Operating Costs’ incurred by the Landlord during each lease year during the term of this Lease, after the base year for determining such ‘Building Operating Costs’ as hereinafter defined, exceed ‘Building Operating Costs’ incurred by the Landlord during said base year.”

Paragraph 5B states in pertinent part:

“Tenant hereby agrees to pay to Landlord as further additional rent ‘Tenant’s Prorata Share’ of any increase in real estate taxes payable during any Lease Year over and above the real estate taxes payable during the Base Year, being the First Lease Year.”

Simultaneously with the execution of the lease, the parties executed a rider (the 1973 rider) which modified the lease in certain respects. The critical portion of the 1973 rider, for purposes of this litigation, is paragraph 2 — B, which provides:

“The Additional Rental described in Paragraphs 5 — A and 5 — B of the Lease is limited to a maximum of four percent (4%) of the annual rental as described in Paragraph 4 of the Lease during any lease year period.”

On January 23, 1975, the parties entered into an amendment to the original lease (the 1975 amendment) whereby additional space was rented and the annual rental was increased to its present level of $55,142.90. Paragraph 3 of the 1975 amendment reaffirms the limitations of the 1973 rider by providing that the provisions of the rider “relating to the limitation on Additional Rental to 4% of the Annual Rental shall refer to an annual rental of $55,142.90 per year.” This annual rental multiplied by .04 yields $2,205.72.

Beginning in 1975, and continuing each year thereafter, Fleet-wood invoiced Kerr for additional rental it claimed was due under the lease. For the years 1975 through 1980, Kerr paid invoices in the amounts of $351.53 for 1975, $2,495.35 for 1976, $4,905.99 for 1977, $6,822.62 for 1978, $9,391.61 for 1979 and $13,050.51 for 1980. Fleet-wood also invoiced Kerr in the amount of $15,256.23 for the year 1981.

On December 19, 1978, Kerr entered into a sublease for the premises with Data General. The sublease was expressly consented to by CT&T in an agreement between it, Kerr and Data General dated February 26, 1979. The sublease specifically provided that the sublessee would be required to pay the additional rental required under paragraph 5 of the lease as amended by the 1973 rider.

Thereafter, for the years 1979 to 1981, upon being invoiced by Fleetwood for additional rental, Kerr, in turn, invoiced Data General. However, Data General refused to pay additional rental as invoiced on the ground that under the terms of the lease and sublease, additional rental could not exceed 4% of the annual rental, or $2,205.72 per year. Data General agreed to pay additional rental in the amount of $2,205.72 per year for the period of time it had been in possession of the premises. Following Data General’s refusal to pay the higher amount of additional rental, Kerr officials reviewed the lease provisions and determined that they had been invoiced by Fleetwood for additional rental on a cumulative basis, resulting in alleged overpay-ments of $25,637.48 for the period 1975 to 1980.

On January 11, 1982, Fleetwood sent a notice to Kerr demanding payment of additional rental for the year 1981 in the amount of $15,256.23. This amount was arrived at by multiplying $2,205.72 times six years, 11 months, which was the length of Kerr’s right to possession. Kerr tendered $2,205.72. Fleetwood refused payment and sent Kerr a notice of default and termination of possession.

Plaintiffs subsequently filed a complaint seeking a declaratory judgment that Kerr is not liable for additional rental in an amount exceeding $2,205.72 per year for the duration of the lease, that Data General's right to possession not be disturbed as a result of Kerr’s refusal to pay additional rental exceeding $2,205.72 per year, and that Kerr be awarded a judgment against defendants for $25,637.48, the amount it allegedly was overcharged for additional rental, plus interest.

In lieu of answering the complaint, defendants moved to dismiss or, in the alternative, to strike the complaint. Defendants’ motion sought dismissal on grounds that paragraph 2 — B of the 1973 rider provides for cumulative additional rental increasing annually by an amount of up to 4% of the annual rental. Alternatively, the motion sought to have Data General stricken as a party plaintiff, alleging it had no contractual privity with defendants and therefore lacked standing to sue. Finally, the motion sought to strike the portion of the complaint seeking a refund of Kerr’s alleged overpayments; defendants contended that such payments, if erroneously made, had been made under a mistake of law, thereby precluding Kerr from obtaining a refund.

Following a hearing on the motion, the trial court entered judgment for defendants dismissing the complaint with prejudice and without leave to amend. Kerr and Data General appeal the dismissal order. We note that subsequent to the filing of this appeal, CT&T and Fleetwood filed two lawsuits involving the leased premises in the circuit court of Cook County against Kerr and Data General. One suit seeks eviction and unpaid rent, and the other seeks recovery of attorney fees incurred in the instant litigation. Kerr and Data General have moved to dismiss both actions.

The issues for our determination are: (1) whether the trial court erred in dismissing the claim for declaratory judgment limiting plaintiffs’ additional rental obligation to no more than $2,205.72 per year; (2) whether it is proper for this court to construe the lease and render an interpretation as to the plaintiffs’ additional rental obligation; and (3) whether the trial court erred in dismissing Kerr’s claim for a refund of alleged overcharges in additional rental.

I

The first issue presented for review is whether the complaint states a cause of action for declaratory relief. To bring a cause of action for declaratory relief, the following two basic requirements must be met: first, an actual controversy must exist and, second, the plaintiff must be interested in the controversy. (Underground Contractors Association v. City of Chicago (1977), 66 Ill. 2d 371, 375-76, 362 N.E.2d 298; Royal Globe Insurance Co. v. Aetna Insurance Co. (1980), 82 Ill. App. 3d 1003, 1005-06, 403 N.E.2d 680.) An “actual controversy” exists if there is a legitimate dispute admitting of an immediate and definite determination of the parties’ rights, the resolution of which will aid in the termination of the controversy or some part thereof. An “interest in the controversy” means that the plaintiff must have a personal claim or right which is capable of being affected. (Underground Contractors Association v. City of Chicago (1977), 66 Ill. 2d 371, 375-76; Royal Globe Insurance Co. v. Aetna Insurance Co. (1980), 82 Ill. App. 3d 1003, 1005-06, 403 N.E.2d 680.) A complaint seeking a declaration of the rights of a landlord or tenant under a lease meets the foregoing requirements. See Citizens National Bank v. Morman (1979), 78 Ill. App. 3d 1037, 398 N.E.2d 49; Dixie Square Thom McAn, Inc. v. Dixie Square Management Co. (1977), 55 Ill. App. 3d 619, 370 N.E.2d 1256.

In the instant case, the plaintiffs’ complaint alleged that a landlord-tenant relationship was created between defendants CT&T and Kerr when a written lease was signed September 26, 1973; that the premises covered by the lease were sublet to Data General on December 19, 1978, with the express consent of CT&T; that in early 1982, Fleetwood, as managing agent for the property, demanded payment of additional rental for 1981 in an amount nearly seven times greater than $2,205.72, the maximum allowable additional rental provided for in the lease; that the sublease between Kerr and Data General obligated Data General, the party in possession, to pay such additional rental as Kerr was obligated to pay; and that when Kerr refused to pay the amount demanded, Fleetwood served upon it a notice of default and termination of possession dated March 12, 1982, threatening to terminate plaintiffs’ right to possession of the premises.

It is axiomatic that a motion to dismiss admits all facts well pleaded and the reasonable inferences which may be drawn therefrom are taken as true for purposes of the motion. (Horwath v. Parker (1979), 72 Ill. App. 3d 128, 134, 390 N.E.2d 72.) A reviewing court should interpret the facts alleged in the complaint in the light most favorable to the plaintiff. (Farns Associates, Inc. v. Sternback (1979), 77 Ill. App. 3d 249, 252, 395 N.E.2d 1103.) The complaint should not be dismissed unless the pleadings disclose that no set of facts could be proved that will entitle the plaintiff to relief. Patton v. T.O.F.C., Inc. (1979), 79 Ill. App. 3d 94, 98, 398 N.E.2d 313.'

In this case, the well-pleaded facts in plaintiffs’ complaint, as set forth above, and the inferences therefrom favorable to plaintiffs, taken as true, adequately set forth a cause of action for declaratory relief. The allegations in the complaint disclose that an actual controversy is present in which both plaintiffs have a personal right which is capable of being affected. The complaint therefore should not have been dismissed.

We further reject defendants’ argument that Data General has no standing to sue and should be stricken as a party plaintiff. The record reveals that Data General, as sublessee, is presently in lawful possession of the premises which are the subject of the lease in dispute. Data General’s possession has been threatened, both by express threats by defendants and by virtue of defendants’ filing of litigation seeking payment of the controverted additional rental and eviction for failure to make such payments. Under these circumstances, Data General is clearly an “interested party” in the controversy and has standing to bring an action for declaratory relief. Ill. Rev. Stat. 1981, ch. 110, par. 2-701.

We also note that defendants admit that Data General might have standing if CT&T had agreed to Data General’s sublease. Defendants allege that the record does not indicate such consent. This allegation is erroneous, however, since the record contains a copy of an agreement signed by CT&T approving the sublease.

II

Plaintiffs ask this court to construe the lease and render a determination as to their additional rental obligation. It is plaintiffs’ contention that the language of the lease limits their additional rental obligation to no more than $2,205.72 per year. Plaintiffs further seek a declaration that their right to possession not be disturbed for failure to pay additional rental in excess of that amount.

In Illinois, the same rules governing contract construction apply to the construction of written leases. (Chicago Title & Trust Co. v. Southland Corp. (1982), 111 Ill. App. 3d 67, 70, 443 N.E.2d 294.) In construing a lease, the principal function of this court is to give effect to the intention of the parties as ascertained from the language of the lease. (American National Bank & Trust Co. v. Olympic Savings & Loan Association (1978), 60 Ill. App. 3d 722, 724, 377 N.E.2d 255.) When the lease terms are, clear and unambiguous, they must be enforced; a court cannot remake a lease and give the litigant a better bargain than he himself was satisfied to make. Walgreen Co. v. American National Bank & Trust Co. (1972), 4 Ill. App. 3d 549, 554, 281 N.E.2d 462.

Here, we find that the intent of the parties, as ascertained from the language of the lease, was to limit the amount of additional rental to no more than $2,205.72 per year. The language of the lease is unambiguous. Paragraph 2 — B of the 1973 rider contains an express limitation on additional rental. It provides, in pertinent part:

“Additional Rental *** is limited to a maximum of four percent (4%) of the annual rental as described in Paragraph 4 of the Lease during any lease year period.”

The “annual rental” referred to in paragraph 2 — B was $29,234.05 and covered 3,587 square feet. Subsequently, the parties increased the rental space pursuant to the 1975 amendment and, correspondingly, the additional rental cap also increased. However, paragraph 3 of the 1975 amendment expressly reaffirmed the 1973 rider provision limiting additional rental to 4% of the annual rental; the 1975 amendment specified that for this purpose, “Annual Rental shall refer to an annual rental of $55,142.90 per year.” Construing the language of these two provisions together indicates that there is to be a flat cap on additional rental per year which is to be calculated by multiplying $55,142.90 by .04, equalling the amount of $2,205.72.

Defendants concede that the lease language is clear and unambiguous. Despite this concession, defendants ask this court to go beyond the language of the lease in order to construe the document in accordance with “commercial reality” to protect the landlord against inflation. Defendants argue that for the landlord to have contracted for anything other than cumulative annual increases would have been a bad business deal. However, under Illinois law it is improper to construe a lease in a manner inconsistent with its unambiguous language (Young v. Illinois Athletic Club (1923), 310 Ill. 75, 82-83, 141 N.E. 369; Sol. K. Graff & Sons v. Leopold (1981), 92 Ill. App. 3d 769, 771-72, 416 N.E.2d 275, particularly when the purpose is to retroactively exculpate parties from their own poor bargain in failing to protect against inflation (Springfield Marine Bank v. S. S. Kresge Co. (S.D. Ill. 1960), 181 F. Supp. 448, 452, affd (7th Cir. 1960), 283 F.2d 119). The fact that one party fails to provide a sufficient hedge against inflation is not a reason to construe a lease in a manner inconsistent with its clear language. 181 F. Supp. 448, 452.

If defendants wanted the yearly escalations in additional rental to be cumulative, they should have expressly so provided in the lease. In the absence of such an express provision, this court cannot rewrite the contract entered into between the parties.

Defendants further argue that Kerr and Data General are es-topped from asserting that the obligation to pay additional rental is limited to $2,205.72 because Kerr paid invoices in excess of that amount for five years. The foregoing argument, however, is contrary to long-standing Illinois Supreme Court precedent. (Young v. Illinois Athletic Club (1923), 310 Ill. 75, 141 N.E. 369.) In Young v. Illinois Athletic Club, the court held that where the terms of a lease are clear and unambiguous they must be enforced in accordance with their plain language, regardless of any prior construction of the parties. (310 Ill. 75, 83-84.) In Young, the lessor was reimbursed by the lessee for several years for Federal income taxes paid on rental income from the leased premises. When the lessee later declined to pay such taxes, the lessor brought suit seeking a judicial interpretation of the lease language pertaining to additional rental. The supreme court, in holding in the lessee’s favor, specifically rejected the lessor’s argument that the lessee was estopped from denying liability for the disputed taxes merely because it made prior payments of such taxes. 310 Ill. 75, 83-84.

Moreover, defendants’ estoppel argument regarding the past conduct of the parties is undercut by their own prior actions. In their brief, defendants allege that since the inception of the lease Fleet-wood has interpreted paragraph 2 — B of the 1973 rider so that “[d]ur-ing each successive lease year the maximum permitted escalation increased by another $2,205.72.” Defendants reiterate their position as follows:

“This Court should note that Defendants do not seek an interpretation of the lease which would allow a compounding of rent increments. Inflation has compound effects, but the 4% limitation refers to 4% of the annual rent during the Base Year — not 4% of the prior year’s total rent. The parties construed the lease as allowing only equal annual rent increments, and it is that construction which Defendants ask now.” (Emphasis added.)

After examining the amounts actually billed for additional rental, however, we find an inconsistency between defendants’ argument and their conduct. The record reveals that in three of the six years for which Fleetwood invoiced Kerr for additional rental, the increase in additional rental over the previous year exceeded $2,205.72. Specifically, Fleetwood billed Kerr for additional rental in the amount of $4,905.99 in 1977, an increase of $2,410.64 from 1976; $9,391.61 in 1979, an increase of $2,568.99 from 1978; and $13,050.51 in 1980, an increase of $3,658.90 from 1979. Hence, defendants’ billings for additional rental fail to reflect the limitation on increases they now claim was intended by the language of the 1973 rider.

We further reject defendants’ argument that this court cannot definitively interpret the lease provisions in dispute, but must remand the matter to the trial court. The law does not require such a result. It is well established that absent ambiguity, the construction of a contract is purely a question of law and may be “determined by a reviewing court unrestrained by the trial court’s judgment.” Hartwig Transit, Inc. v. Menolascino (1983), 113 Ill. App. 3d 165, 168, 446 N.E.2d 1193; Business Development Services, Inc. v. Field Container Corp. (1981), 96 Ill. App. 3d 834, 839, 422 N.E.2d 86; Patton v. T.O.F.C., Inc. (1979), 79 Ill. App. 94, 99, 398 N.E.2d 313.

Given the facts of the instant case and the law cited above, we hold that pursuant to the lease plaintiffs are not liable for additional rental in an amount exceeding $2,205.72 per year. Consequently, it follows from this holding that their right to possession not be disturbed for failure to pay additional rental in excess of $2,205.72 per year.

Ill

Finally, we turn to Kerr’s contention that the trial court erred in dismissing the portion of the complaint seeking a refund of excessive additional rental paid to defendants. The complaint alleged that Kerr paid invoices submitted by Fleetwood assuming that the invoices set forth the correct amount of additional rent due and owing, an assumption that turned out to be erroneous. Specifically, paragraphs 11 and 12 of the complaint alleged, in pertinent part:

“11. Beginning in 1975, Fleetwood began invoicing Kerr for additional rental. Assuming that Fleetwood was properly invoicing Kerr in accordance with the provisions of the Lease, Kerr paid these invoices, totaling $351.53 for 1975, $2,495.35 for 1976, $4,905.99 for 1977, $6,822.62 for 1978, $9,391.61 for 1979 and $13,050.51 for 1980. Fleetwood has also invoiced Kerr in the amount of $15,256.23 for the year 1981. Kerr, in turn, invoiced Data General for 1981. Data General refused to pay the full amount invoiced, however, on the ground that under the terms of the Lease, the additional rental could not exceed 4% of the base rental of $2,205.72 per year.
12. Alerted by Data General’s refusal to pay the higher amount, officials at Kerr reviewed the Lease provisions and determined that Fleetwood had in fact not been invoicing Kerr in the amount provided in the Lease, but rather had been invoicing Kerr for a cumulative amount which was in- excess of 4% of the base year’s rental as provided in the Lease.”

Plaintiffs assert that the above allegations seek a refund of overpay-ments resulting from a mistake of fact. Defendants allege, however, that any overpayments resulted from a mistake of law; they argue that Kerr had full knowledge of the facts, but misapprehended its rights and obligations under the lease.

It is well established that money paid under a mistake of fact, which would not have been paid had the facts been known, may be recovered. (Board of Education v. Holt (1976), 41 Ill. App. 3d 625, 626, 354 N.E.2d 534.) However, money paid under a mistake of law cannot be recovered. (Hartford v. Doubler (1982), 105 Ill. App. 3d 999, 1001, 434 N.E.2d 1189.) In the case at bar, the determination as to why the payments were made is a factual determination not properly decided on a motion to dismiss. Accordingly, we remand the matter to the circuit court for a trial on the merits as to plaintiffs’ right to recover overpayments of additional rental.

For the foregoing reasons, the judgment of the circuit court of Cook County dismissing the cause is hereby reversed and the cause is remanded for further proceedings consistent with this opinion.

Reversed and remanded.

GOLDBERG and CAMPBELL, JJ., concur.


author: JUSTICE CAMPBELL

text:
      In re MARRIAGE OF NORMA PAHLKE, Petitioner-Appellee, and FRAZER PAHLKE, Respondent (Ute Schmidt, a/k/a Ute Domnick, Third-Party Defendant-Appellant).
    First District (1st Division)
    No. 82—2598
    Opinion filed December 30, 1983.

      Andrew A. Ziemba and Terrence E. Leonard, both of Chicago, for appellant.
    Grant & Grant, and Jerry S. Goldberg and Evan James Mammas, both of Mammas & Goldberg, Ltd., both of Chicago, for appellee.
   JUSTICE CAMPBELL

delivered the opinion of the court:

Third-party defendant Ute Schmidt, also known as Ute Domnick, appeals from an order of the circuit court of Cook County, domestic relations division,, which imposed a constructive trust over, and removed her from possession of a house that she purchased from Frazer Pahlke, the husband in a pending divorce proceeding. The court gave possession of the house to Frazer’s wife, Norma. The appeal relates solely to issues involving the third-party defendant Ute as the divorce proceeding is still pending in the trial court.

Ute raises the following issues on appeal: (1) Whether the trial court in a civil matter is required to apprise a pro se defendant of the consequences of the pending proceedings; (2) whether prior to the issuance of a divorce, the circuit court, domestic relations division, has jurisdiction to enter an order imposing a constructive trust over property owned by a third-party defendant; (3) whether the sale of the marital home by the husband may be set aside as a sham transaction when the purchaser gave consideration and received title; (4) whether a court may adjudicate property claim and rights between parties in a hearing initiated by a petition for a rule to show cause.

Frazer and Norma Pahlke were married in 1964. They have four children ranging in age from 14 to seven. In 1976, a home was purchased for $92,400 in Glenview, Illinois, and the family resided there until June 19, 1982. Title to the property was held in a land trust for the beneficial interest of Frazer. Both Frazer and Norma were liable under the mortgage on the house.

On December 1, 1980, Norma commenced this action by the filing of a praecipe for summons. (Ill. Rev. S'tat. 1979, ch. 40, par. 411.) On December 11, 1980, the court entered an agreed injunction preventing Frazer from “beating, striking, abusing, molesting, threatening, or in any manner interfering with the Petitioner and minor children ***.” Without informing his wife, on May 7, 1982, Frazer signed a contract to sell the house in Glenview to Ute and closed the sale on May 17, 1982. On June 19, 1982, again without informing his wife or children, Frazer packed and moved the family belongings to a townhouse apartment in Wheeling, Illinois. Ute took immediate possession of the house. Thereafter, on June 28, 1982, Norma filed a petition for dissolution of marriage and, naming Ute as an additional party defendant, filed a petition for a rule to show cause why a constructive trust should not be declared over the Glenview house.

Norma’s complaint alleged inter alia that she had resided at the marital home until June 19, 1982; that when she attempted to regain entry to the home on June 23, she learned that it was occupied by Ute who claimed to have purchased it from Frazer; that Norma had never signed any documents releasing her interest in the house; that Norma believed Frazer and Ute to be romantically involved; and, that the transfer of the marital home was fraudulent and in violation of the preliminary injunction. Norma prayed that the court declare a constructive trust over the home and award her sole ownership of the property and the right to reside there with the children during the pendency of the action.

At the hearing on Norma’s petition, Norma testified that she had believed that she was a joint owner of the house and that since she and her husband had purchased the house they have spent approximately $8,000 in improvements and repairs. She testified that on June 19, 1982, her husband told the family that they were all going to Great America Amusement Park. He dropped off Norma and the children at the Park and told them he had to go to work. At 9:30 p.m. he picked them up and after dropping off several friends of the children he drove them past some of the sites where he had been working. Then at about 11:30 p.m. he stopped in front of an apartment building in Wheeling and told them they were going to visit friends who had just moved there. When they walked into the apartment they saw that it was filled with boxes and some of their furniture. Frazer then announced, “Well, this is where you’re going to live.” Norma testified that she did not know of any emergencies or any reasons that would compel her husband to sell the house and that they had no debts. She testified that the monthly payments on their mortgage were about $452 and that the rent on the apartment was $450 per month. She also testified that the house had four bedrooms whereas the apartment had only three bedrooms.

Norma testified that she did not know about the sale of the home until after her husband had moved them to Wheeling. She testified that she had never met Ute until the beginning of the court proceeding but that her husband had known Ute for about 2V2 years.

Frazer Pahlke testified that he is an environmental engineer. He adjusts and repairs heating and cooling plants in commercial buildings. Frazer testified that he learned from a friend that Ute Schmidt was interested in purchasing his house. He had met Ute when he was repairing the power plant at Northwestern University. Frazer testified that neither a real estate broker nor a lawyer were involved in the sale and that a preliminary title report was not obtained. All documents used in the transfer of the house were prepared by Ute. Frazer also testified that he did not obtain from Ute a release of the mortgage on which he and his wife were liable. Frazer testified that after the sale he contacted the real estate agent through whom he purchased the home originally and she estimated the value of the house to be $115,000 to $125,000.

Frazer testified that he placed the money he received on the sale in his checking account and that approximately $5,000 remained. Frazer purchased a new pickup truck for $16,000 cash. He testified that his previous truck had been damaged in an accident five months before and that he needed the truck for his job. Frazer also testified that he used $16,000 of the sale proceeds to repay a loan his mother had made to him for the purchase of the house.

Frazer testified that he did not discuss the sale of the house with his wife. He stated Norma had been under psychiatric treatment for depression and schizophrenia since 1976. Frazer testified that his wife’s comprehension was limited and that she could not handle the responsibility of taking care of the children and running the household. He stated that he was unable to discuss anything reasonably with his wife. Frazer handled all family financial matters and purchased the family’s food and clothing. Frazer testified that he sold the house because he could not afford to pay his wife’s medicine bills and the expenses of the house.

Third-party defendant Ute Schmidt testified that she is employed as a librarian at Northwestern University. She testified that she heard about the fact that the house was for sale from someone at work. After driving by the house she told her friend to contact the owner. Frazer called her and they made arrangements for her to see the house. She viewed the interior of the home twice and neither time did she see Norma or the children. Ute stated that the interior of the house was “very dirty and messy” with broken windows and doors, torn furniture and torn wallpaper. She testified that Frazer wanted $120,000 for the house but after her second visit he accepted her offer of $90,000. Ute testified that she prepared the real estate contract by comparing it to forms she had from the purchase of her other house. Ute paid $8,000 in earnest money and $30,378.21 at closing for the purchase of the house. The mortgage balance was $49,677.24 as of August 4, 1982. Ute stated that she had been making mortgage payments since she moved into the house. She also testified that she owned a home in Wilmette. Ownership of that house was shared by Ute, her mother’s estate and Ute’s former husband who is required by their divorce decree to make the mortgage payments. She testified that the house had been on the market but that her former husband had taken it off since they were not able to sell it.

On August 25, 1982, the trial court determined from all of the evidence that “the purported sale by Mr. Pahlke to Miss Dominick was a sham. They acted in concerted collusion to deprive Mrs. Pahlke of her share, what ever that may be, in the home ***.” The trial court granted Norma’s petition for constructive trust and rule to show cause. The court restored Norma to possession of the house and held Frazer in contempt of court for violating the preliminary injunction entered when Norma filed her praecipe for summons. On September 7, 1982, the trial court further ordered that because Norma’s emotional health was endangered, she was given exclusive possession of the house and Frazer and Ute were restrained from reentering the property for 10 days.

Ute first argues that she was denied due process of law by the courts’ failure to appraise her, appearing pro se, of the possible orders that could be entered against her. Norma argues that Ute was notified of all the hearings, of the nature of the proceedings, was present in court at each hearing and filed appropriate responsive pleadings.

The record reveals that Ute was informed of her right to be represented by an attorney. We observe that the pleadings filed by Ute appear to resemble those regular and customary pleadings filed by an attorney or someone with legal knowledge. We also observe in passing that the notary on Ute’s pleadings bears the same name as Frazer’s attorney. When opposing counsel questioned Ute about her pleadings, she testified that she had prepared them herself and that someone, who she would not name, had helped her. She stated, “I don’t want to put [sic] any one in trouble here. I did this myself. I asked around.”

Once a party has chosen to waive counsel and represent himself, he is responsible for his own defense and he may not expect favored treatment from the court. (Bard v. Harvey (1979), 74 Ill. App. 3d 16, 21, 392 N.E.2d 371, 375; see Biggs v. Spader (1951), 411 Ill. 42, 46, 103 N.E.2d 104, 107, cert, denied (1952), 343 U.S. 956, 96 L. Ed. 1356, 72 S. Ct. 1051.) From the record in this case, respondent’s choice to represent herself pro se and the conduct of the court proceedings did not result in a denial of due process.

Ute next contends that the trial court cannot adjudicate property rights and claims between the parties to a dissolution action before entry of the decree of dissolution. Ute argues that the jurisdiction of courts of chancery to determine divorce cases depends on the grant of the statute not on general chancery power. Under the Illinois Marriage and Dissolution of Marriage Act (IMDMA) (Ill. Rev. Stat. 1981, ch. 40, par. 101 et seq.), the court has power to adjust equities and determine rights of one party in the property of the other party where a divorce has been granted. (Kujawinski v. Kujawinski (1978), 71 Ill. 2d 563, 376 N.E.2d 1382; In re Estate of Chandler (1980), 90 Ill. App. 3d 674, 677, 413 N.E.2d 486, 489.) Ute argues that with respect to third parties, relief while a divorce action is pending is expressly limited to restraining orders prohibiting the transfer, encumbrance, concealment or other disposition of property during the pendency of the dissolution action (Ill. Rev. Stat. 1981, ch. 40, par. 501(a)(2)(i)).

Ute also contends that the proceedings resulted in a complete adjudication of the property rights asserted by the parties despite the fact that the proceedings were initiated by a petition for a rule to show cause and the parties’ divorce case is still pending. Ute asserts that Norma’s attorney told the court “*** all we are asking Your Honor to do is to maintain the status quo as of the moment before the conveyance ***.” Norma argues that domestic relations courts are clothed with the equitable remedies necessary to effectuate compliance with the Act and that this includes the authority to impose a constructive trust.

The trial court judge in the domestic relations division has jurisdiction to hear all issues which are justiciable in nature. (In re Marriage of Peshek (1980), 89 Ill. App. 3d 959, 412 N.E.2d 698.) The IM-DMA expands the panoply of remedies available to the courts. (Hofmann v. Hofmann (1983), 94 Ill. 2d 205, 446 N.E.2d 499.) Section 503 of the IMDMA replaced the common law “title” doctrine that considered only which spouse held title in the distribution of real property, with a common-enterprise theory of marriage (Hofmann).

Although the IMDMA makes no provision for the filing of a third-party action in a dissolution proceeding to determine the parties’ rights in alleged marital property action held by the third party, the right to file a third-party action has been recognized where the alleged marital asset is held in trust (Demos v. Demos (1972), 8 Ill. App. 3d 906, 290 N.E.2d 304; England v. England (1922), 223 Ill. App. 549). In In re Marriage of Peshek, this court determined that a third party holding marital property should be brought into the dissolution proceedings by a third-party complaint and proper summons where it was unclear how the third party came into possession of the marital asset.

In the present case the parties do not argue that Norma was without property rights in the marital home. Norma and Frazer had lived in the home for six years. Norma was still liable on the mortgage. Ute was a proper third-party defendant under the circumstances of this case because she was alleged to have come into possession of the marital home through a sham transaction. See Lerner v. Zipperman (1979), 69 Ill. App. 3d 620, 387 N.E.2d 946.

Further, the evidence before the trial court was sufficient to establish clearly and convincingly the court’s preliminary finding that the sale was a sham undertaken to defraud Norma of any rights she may have in the home in the pending dissolution action. (See Ray v. Winter (1977), 67 Ill. 2d 296, 367 N.E.2d 678.) It has been held that

“a transferee is chargeable with acquiescence in a fraudulently intended transfer where he is in possession of facts and circumstances which are not reconcilable with ordinary business integrity or would otherwise put a prudent person on inquiry.” (Hof-mann v. Hofmann (1983), 94 Ill. 2d 205, 225, 446 N.E.2d 499, 507.)

We find that under the unusual circumstances of this case, where the third party and the husband may have acted in collusion to deprive the wife and children of the marital home and violated the domestic relations court’s preliminary injunction, the trial court did not err in granting possession of the marital home to the wife pending the dissolution of marriage.

The recent case Hofmann v. Hofmann (1983), 94 Ill. 2d 205, 446 N.E.2d 499, supports our decision. The supreme court found permissible a property division following a divorce decree which gave the wife a 30% interest in farmland held by her husband’s parents. That farmland had been transferred to the parents through the son’s default on a land contract during the pendency of the divorce action. The son was purchasing the farm from his parents by a land contract under which the parents held title until the sale was completed. The son had already paid approximately $420,000 on the contract. A month and a half after the wife filed for divorce, the husband defaulted on a $5,000 installment payment. The parents immediately initiated forcible entry and detainer proceedings which the son did not contest and regained possession of the property. The son subsequently entered a land rental arrangement with his parents and continued to farm the land. The supreme court stated “fraud against marital property is not to be condoned even though it occurs before dissolution.” (94 Ill. 2d 205, 220, 446 N.E.2d 499, 505.) The court determined that the son’s forfeiture was in fact a fraud against his wife’s marital property when measured by whether it was intended collusively with intent to regain the property. The court also held that since the parents had acquiesced in the son's fraud, the 30% lien in the wife’s favor entered against the parent’s title was permissible.

We agree with Ute’s argument that the IMDMA. does not give the court authority to distribute property until after the dissolution of marriage has been granted (Ill. Rev. Stat. 1981, ch. 40, par. 503). (Hofmann v. Hofmann.) Both parties conceded at argument before this court that the proceedings below were of a preliminary nature. We also note that Ute was not given any set-off, credits or allowances. Therefore, the order of the circuit court is affirmed only to the extent that it was preliminary in character and intended to maintain the status quo pending a full and complete hearing to determine the rights of all parties. That portion of the order which purports to create a constructive trust is vacated. In light of our decision, we decline to consider the remaining issues raised by the third-party defendant.

Accordingly, that portion of the order below awarding temporary and preliminary relief is affirmed. That portion of the order creating a constructive trust is vacated. The cause is remanded for further proceedings consistent with the views expressed herein.

Affirmed in part, reversed in part and remanded.

McGLOON and GOLDBERG, JJ., concur.


text:
    RICHARD MORTELL et al., Plaintiffs-Appellants and Cross-Appellees, v. INSURANCE COMPANY OF NORTH AMERICA, Defendant-Appellee and Cross-Appellant.
    First District (1st Division)
    No. 82—1881
    Opinion filed December 12, 1983.
    Rehearing denied January 23, 1984.

      Arvey, Hodes, Costello & Burman, of Chicago (Ralph A. Mantynband and

      Andrew B. David, of counsel), for appellants.
    Baker & McKenzie, of Chicago (Francis D. Morrissey, John W. Dondan-ville, Thomas A. Doyle, and William Lynch Schaller, of counsel), for appellee.
   JUSTICE CAMPBELL

delivered the opinion of the court:

Plaintiffs, Richard Mortell, Alan Freeman, Leslie Rosenthal and Robert Myron, four partners doing business as Rosenthal & Company, appeal from a summary judgment entered against them in the trial court. Plaintiffs (hereinafter referred to as Rosenthal) had sought a declaratory judgment adjudicating their rights under two fidelity bonds issued by defendant, Insurance Company of North America (hereinafter referred to as INA). Plaintiffs sought a declaration that $2 million in losses, representing customer claims, the defense of those claims and the defense of an action by the Commodities Futures Trading Commission (CFTC) were covered by the bonds. Summary judgment against plaintiffs was entered on all but one of the claims, and defendant, INA, cross-appeals from the $133,000 judgment on the allowed claim.

The issues presented for review may be summarized as follows: (1) Whether summary judgment was proper with respect to claims discovered by the insured prior t the January 8, 1977, amendment to coverage in light of the alleged factual issue of timely notice to the insured of these losses; (2) Whether the January 8, 1977, amendment to coverage was valid and enforceable with respect to claims the insured delivered after this date; (3) Whether the policy clause which excludes coverage for losses resulting from acts of the insured’s partners releases the insurer of any obligation to indemnify the insured for attorney fees spent in defending the CFTC action.

On cross-appeal, two issues are raised: (1) Whether the allowed claim was barred by failure to provide timely notice as required by the bond; and (2) Whether the trial court erred in entering a judgment in excess of the bonds $50,000 limit per occurrence.

Rosenthal is a licensed futures commodity merchant. In January 1975 Rosenthal procured two fidelity bonds from INA. The policies remained in effect until cancelled by INA on July 8, 1978. During the time the bonds were in effect Rosenthal paid INA $66,479 in premiums. The bonds, entitled Brokers Blanket Bonds, provided indemnity to Rosenthal for losses suffered as a result of dishonesty of their employees, and also as a result of forgery, theft and other such acts.

The record discloses that in March 1975 plaintiff hired a certain Richard Taylor to become manager of its Dallas branch office. Soon after being hired, Taylor expressed interest in selling London commodities option contracts through the Dallas branch office. Taylor had sold these options in his previous position as manager of the Dallas branch of another commodities broker. Because at the time there was a question as to whether the Texas Securities Commissioner would allow these options to be sold in Texas, plaintiffs opened offices in other cities throughout the country to market London commodities options. Between July 1975 and early spring, 1976, plaintiffs opened approximately 20 branch offices under the name “Rosenthal & Company, Taylor-Grant Division.”

In May 1976, plaintiffs learned that the CFTC was investigating the Taylor-Grant Division’s marketing of London commodities options. The CFTC is a Federal agency organized to regulate the commodities industry. (See Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Curran (1982), 456 U.S. 353, 72 L. Ed. 2d 182, 102 S. Ct. 1825.) Under the Commodity Exchange Act (7 U.S.C. sec. 1 et seq. (1976 & Supp. IV 1980)) the CFTC may initiate investigations of and file complaints against commodity professionals and provide a reparations procedure for customer claims based upon violations of the Act. Complaints may be heard before an administrative law judge or by way of application for an injunction in the Federal district court or both. (7 U.S.C. secs. 9, 13a — 1 (1976).) The CFTC investigation resulted in the CFTC filing a complaint for injunctive relief in the United States District Court of the Northern District of Illinois in October 1976. The complaint named Rosenthal, its general partners and certain of its employees as defendants. In April 1977, the CFTC filed an administrative complaint containing the same allegations against the same defendants. The CFTC alleged that each of the defendants had engaged in cheating, defrauding and deceiving purchasers or prospective purchasers of London commodity options in violation of the Commodity Exchange Act and regulations thereunder (7 U.S.C. sec. 6c(b) (1976); 17 C.F.R 93269). The CFTC complaint specifically charged that the defendants had engaged in or had directed and caused company salesmen to engage in a high pressure sales campaign conducted by repeated, unsolicited long distance telephone calls to persons who were inexperienced as to London commodity options transactions. These persons were told false and deceptive statements about profit expectations of London commodity options and were deceptively urged to purchase options immediately to take advantage of a purported favorable market price for such options.

The CFTC further alleged that defendants had hired and directed numerous salesmen who lacked knowledge of the risks and trading mechanics of London commodity options. Defendants provided these salesmen with glowing, but deceptive and misleading, “canned” sales speeches to read over the telephone to prospective customers. Defendants instructed these salesmen to provide only minimal information, to conceal material facts and to avoid unfavorable explanations concerning the recommended purchase of such options. In addition, the complaints alleged that the defendants have directly or indirectly concealed and misrepresented the true nature of the purchase price, including all fees and mark-ups, which customers pay to the company for the purchase of options and concealed the fact that the company marks up the price of each option purchased from the London markets from between 40% and 150%.

The initial complaints filed by the CFTC requested only that Ro-senthal be enjoined from engaging in the fraudulent and deceptive selling practices allegedly employed in their marketing of London commodity options. In April 1978, the CFTC amended its Federal court complaint to seek disgorgement of all options, premiums, salaries, commissions and mark-ups received by defendants from their commodity options customers in the amount of $55,143,389.

An evidentiary hearing was held before an administrative law judge for the CFTC between May 1979 and January 1980. Thereafter, the parties submitted briefs and on November 21, 1981, the administrative law judge rendered his opinion finding that the evidence failed to establish that the defendants had violated the Commodities Exchange Act or Commission regulations as alleged. Two months later the Federal district court dismissed the CFTC complaint without prejudice “for want of equity.”

A number of customers also filed complaints against Rosenthal alleging that Rosenthal salesmen made false or deceptive statements or withheld material information regarding London commodity options. These customers sought rescission of their transactions with Rosen-thal pursuant to the Commodity Exchange Act (7 U.S.C. sec. 6b (1976)). The record does not show when the various claims were filed nor does the record show what the allegations in each complaint were. The parties have indicated that the claims arose between 1976 and 1978 and involve similar allegations of salesmen’s dishonesty. Ro-senthal has also stated that many have been settled or resolved through litigation.

The record reveals the following transactions between INA and Rosenthal. Soon after the Federal lawsuit was filed by the CFTC, members of Rosenthal’s staff met with its insurance brokers and INA to discuss the lawsuit. At that time a copy of the CFTC complaint was provided to INA. On January 8, 1977, INA requested Rosenthal to sign an amendment to the broker blanket bonds then in effect. Ro-senthal signed that amendment. The premiums due on the bonds were neither increased nor decreased. On July 26, 1977, INA notified Ro-senthal of its intention to cancel the fidelity bonds. Discussions between INA and Rosenthal ensued, following which INA withdrew the cancellation notice and the bonds remained in full effect. When the CFTC amended their complaint to request disgorgement of monies received by Rosenthal from its commodity options customers, additional meetings between INA and Rosenthal were held. At these meetings Rosenthal discussed not only the amended CFTC complaint but also numerous customer complaints which had been filed against Rosen-thal. Rosenthal provided INA with a list of the customer complaints and gave INA unlimited access to Rosenthal’s files on these complaints. After reviewing Rosenthal’s files, INA cancelled the fidelity bonds effective July 8,1978. This action followed.

Rosenthal filed a complaint in the circuit court of Cook County seeking a declaratory judgment adjudicating the rights and duties of the parties under the broker’s blanket bonds and requested a hearing to determine the sums due Rosenthal on the bonds.

The trial court granted INA’s motion for summary judgment on the issue of whether the claimed losses were covered by the fidelity bonds. With respect to the affirmative defenses raised by INA, the court ruled that whether there was timely notice was an issue of fact not necessary for the disposition of this case. Additionally, the court ruled that one claim, the claim of Marie Auditore, was covered by the bonds and the court ordered that INA pay the Auditore claim within the policy’s limit of $50,000 plus reasonable attorney fees and costs.

The first issue raised by Rosenthal challenges the trial court’s decision to deny Rosenthal indemnity for the customer reparations claims. The fidelity bonds at issue provide coverage for dishonest acts which are discovered during the bond period even if the acts occurred before the bond period. Although the record does not indicate when the numerous customer claims were discovered by Rosenthal, for the purpose of the motion for summary judgment, the parties separated the claims hypothetically into those which were discovered before January 8, 1977, the day Rosenthal signed the amendment to the bonds and those discovered afterwards.

The dishonesty clause in the bonds issued to Rosenthal in 1975 provided that covered losses included:

“Loss through any dishonest or fraudulent act of any of the Employees, committed anywhere and whether committed di-
rectly or by collusion with others, including loss of Property through any such acts of any of the Employees.”

Rosenthal argues that under the case Home Indemnity Co. v. Reynolds & Co. (1962), 38 Ill. App. 2d 358, 187 N.E.2d 274, the dishonesty clause quoted above provides coverage for the activities its employees are accused of committing in the customer reparation claims.

In Home Indemnity, the issuer of a brokers’ blanket bond sought a declaratory judgment that it was not obligated under the bond. Certain salesmen employed by the insured had solicited sales of securities not registered in Illinois in violation of the Illinois Securities Law of 1953 (Ill. Rev. Stat. 1957, ch. 121V2, par. 137.1 et seq.). Under the act, purchasers of unregistered stock were entitled to rescind the stock transaction. Home Indemnity contended inter alia that the acts of the employees were not dishonest within the meaning of the bond. The court stated that the word “dishonest” as used in the fidelity bonds had been interpreted to include “an act manifestly unfair to the employer and palpably subjects him to the likelihood of a loss.” The court also relied upon a description of a dishonest act as one which “indicates a reckless disregard for the interest of the employer.” The court noted that “it is not a necessary condition that the employee personally profit from his acts.” Acts which cannot be considered dishonest within the meaning of the fidelity bond include acts resulting from mere negligence, mistake, error or incompetence. The court also determined that if reasonable men could differ on the issue whether the acts were dishonest within the meaning of the bond, the question was one for the jury. The Home Indemnity court found that since the acts of the insured’s employees in seUing unregistered stock were “detrimental to the firm, disregarded its best interests and subjected it to heavy losses,” the insurer was liable for the loss. Home Indemnity Co. v. Reynolds & Co. (1962), 38 Ill. App. 2d 358, 375-76; see Reserve Insurance Co. v. General Insurance Co. of America (1979), 77 Ill. App. 3d 272, 395 N.E.2d 933.

Rosenthal argues that the fraudulent conduct with which its salesmen were charged in the customer claims arising in 1975 and 1976 is within the bonds’ definition of dishonesty. Their alleged acts were not executed in furtherance of Rosenthal’s best interest and exposed Ro-senthal to substantial losses. Rosenthal contends that in granting the motion for summary judgment the trial court overlooked the substance of the misconduct with which Rosenthal’s employees were charged and accepted INA’s argument that the employees were merely overzealous in their pursuit of business.

INA does not contest the applicability of Home Indemnity. Rather, INA argues that Rosenthal failed as a matter of law to comply with the conditions precedent to recovery under the bonds. The bonds provide that “the insured shall give to the Underwriter written notice of any loss hereunder as soon as possible after the insured shall learn of such loss.” The bond also requires that the insured file a verified proof of loss within 90 days.

INA argues that although Rosenthal discovered some of the alleged dishonesty losses during 1975 and 1976, no written notice of any losses under the bond was given to INA until April 3, 1978. INA asserts that if for the purpose of argument it is assumed that all losses discovered during the period of the original bond were discovered on the day before the amendment became effective, then there is, at the very least, a 15-month delay between the discovery of the customer claims and the delivery of written notice to INA. Discovery of losses suffered by customers occurs, INA contends, when the customer makes a demand for or claims a right of recovery against the employer. (Aetna Casualty & Surety Co. v. Guarantee Bank & Trust Co. (1st Cir. 1966), 370 F.2d 276, 280.) INA argues that timely notice is essential to protect the rights of the surety both with respect to investigating individual claims and with respect to avoiding future losses from company-wide fraud by inducing corrective action or can-celling the bond. INA notes that in fidelity coverage, the bond terminates immediately as to any future dishonesty by the involved employee after his dishonesty is discovered. The bond also provides the insurer with a right of cancellation of the entire bond on 15 days’ notice.

INA cites a number of cases which have held that failure to give notice of a loss to an insurer for a certain length of time constituted as a matter of law failure to give notice as soon as possible under the bond. (American Stevedores, Inc. v. Sun Insurance Office, Ltd. (1964), 142 Misc. 2d 516, 248 N.Y.S.2d 487, aff’d (1965), 260 N.Y.S.2d 427 (six months); Muncie Banking Co. v. American Surety Co. (7th Cir. 1952), 200 F.2d 115 (nine months); State Bank of Viroqua v. Capital Indemnity Corp. (1974), 61 Wis. 2d 699, 703-04, 214 N.W.2d 42, 44 (15 months).

Rosenthal raises two arguments in defense of its failure to give prompt notice. First, Rosenthal challenges INA’s statement that it was not provided with written notice before April 1978. Rosenthal asserts that in 1976 Rosenthal gave INA a copy of the CFTC complaint. The CFTC complaint contained affidavits of several customers who filed claims and references to reparations claims filed by customers. Rosenthal contends that this constituted written notice to INA of the customer claims mentioned in the CFTC complaint.

Secondly, Rosenthal contends that the question whether Rosenthal provided timely notice of the claims being asserted against it is a material issue of fact on which the court may not grant summary judgment. Rosenthal asserts that decisions of this State have held that the issue of reasonable notice is a jury question. Simmon v. Iowa Mutual Casualty Co. (1954), 3 Ill. 2d 318, 121 N.E.2d 509; Higgins v. Midland Casualty Co. (1917), 281 Ill. 431, 118 N.E. 11; Sowinski v. Ra-mey (1976), 36 Ill. App. 3d 690, 344 N.E.2d 635.

We note that several Illinois cases have decided the issue of timely notice to an insurer on a motion for summary judgment. In INA Insurance Co. v. City of Chicago (1978), 62 Ill. App. 3d 80, 379 N.E.2d 34, the court held that where the facts are undisputed the determination of whether the insured used due diligence in giving the insurer notice of accidents is a question of law which may be decided on summary judgment. Also, in Illinois Valley Minerals Corp. v. Royal-Globe Insurance Co. (1979), 70 Ill. App. 3d 296, 388 N.E.2d 253, the court affirmed entry of summary judgment on the issue of reasonable notice where the record disclosed lack of due diligence on the part of the insured and no excuse was offered for the delay in giving notice. See also Country Mutual Casualty Co. v. Van Duzen (1953), 351 Ill. App. 112, 113 N.E.2d 852.

In the present case, however, material facts are in dispute concerning where the various customer claims were discovered by Rosen-thal, when notice of such claims was given to INA and whether delivery of the CFTC complaint constituted written notice of the customer claims therein mentioned. A motion for summary judgment may be granted where there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. (Coomer v. Chicago & North Western Transportation Co. (1980), 91 Ill. App. 3d 17, 415 N.E.2d 865.) If a genuine issue of material fact exists, a motion for summary judgment should not be granted. (Manaban v. Daily News-Tribune (1977), 50 Ill. App. 3d 9, 365 N.E.2d 1045.) Furthermore, the right of the moving party to summary judgment must be clear and free from doubt. (Manaban.) We find that the court erred in awarding summary judgment on the claims discovered before the amendment to the bonds became effective. Under the authority of Home Indemnity, the losses suffered as a result of Rosenthal’s dishonest employees are covered by the bond. The parties, however, have raised a number of factual disputes concerning Rosenthal’s compliance with the conditions precedent to recovery. Accordingly, the entry of summary judgment on the claims discovered before January 8, 1977, is vacated and the cause remanded for trial.

With respect to the claims discovered after January 8, 1977, Ro-senthal contends that the trial court erred in accepting INA’s argument that the amendment limited the coverage of the bonds. The amendment provided:

“Dishonest or fraudulent acts as used in this Insuring Agreement shall mean only dishonest or fraudulent acts committed by such Employee with the manifest intent:
(a) to cause the Insured to sustain such loss; and
(b) to obtain financial benefit for the Employee, or for any other person or organization intended by the Employee to receive such benefit, other than salaries, commissions, fees, bonuses, promotions, awards, profit sharing, pensions or other employee benefits earned in the normal course of employment.”

Rosenthal argues that it was not informed that the amendment limited the coverage provided by the fidelity bond. Rosenthal contends that the claims made by its customers were exactly the type for which brokers’ blanket bonds are intended to provide protection and to permit an amendment to the bonds which restricts coverage of these claims renders illusory the insurance coverage purchased from INA. Further, the insured argues that since the premium was tied to the risk insured and the premium was not reduced when the amendment was signed, the coverage of the bonds was not altered by the amendment.

INA argues that the amendment was part of an industry-wide response to the confusion created by the undefined dishonesty terms in bonds such as the bond at issue in Home Indemnity. INA asserts that by the plain language of the amendment there must be proof of a manifest intent first to harm the employer and second to obtain financial benefit for the employee other than the benefits earned in the normal course of employment such as commissions. INA also points out that it is presumed that a policyholder has read the policy he signs. Pollock v. Connecticut Fire Insurance Co. (1935), 362 Ill. 313, 199 N.E.816.

In support of its motion for summary judgment, INA presented the deposition of Rosenthal’s compliance officer who had investigated the customer claims. The compliance officer stated that the salesmen did not gain anything except a commission from the unauthorized trading alleged in the customer complaints. INA argues that this testimony left no issue of material fact regarding whether the customer claims discovered after January 1977 were covered by the bond’s indemnity provisions.

Rosenthal has not cited any authority for its position that the amendment should not be given effect. We note that Rosenthal has represented in its brief that it is an experienced and sophisticated commodity broker. Rosenthal has not argued that it did not understand the plain meaning of the amendment at the time the amendment was executed. The terms of the amendment are unambiguous and must be given effect as written. (Sowinski v. Ramey (1976), 36 Ill. App. 3d 690, 344 N.E.2d 635.) The trial court did not err in entering summary judgment for INA with respect to customer claims discovered after the amendment was signed.

Rosenthal next argues that it is entitled to reimbursement for attorney fees and court costs spent in defending itself against the CFTC’s claim for disgorgement. Rosenthal contends that INA’s obligation arose whether or not Rosenthal’s defense was successful. Further, Rosenthal contends that INA is not relieved of liability by the exclusionary clause of the bonds that excludes from coverage those losses suffered by Rosenthal which are attributable to acts of its “managing body.” The parties agree that the bonds do not provide indemnity for losses caused by Rosenthal’s partners. Rosenthal, however, asserts that the CFTC action sought to hold the partners liable for the dishonesty of their salesmen under the doctrine of respondeat superior.

INA contends that the CFTC complaint accused the Rosenthal partners of orchestrating a nationwide, fraudulent, high pressure sales campaign for London options. INA argues that since the CFTC complaint specifically charged the partners with directing and causing the dishonest activity of the salesmen, fees expended in the defense of the CFTC action are not within the bonds’ coverage. We agree.

The CFTC complaint, which is a part of the record, clearly alleges that the partners instructed salesmen to provide only minimal information to customers; that the partners failed to disclose to customers that the company purchased options in the London markets in the company’s name rather than in the customer’s name; and, that the partners misrepresented the company’s pricing policy for London options and billed customers for a “foreign service fee” which was allegedly only an additional concealed commission charge. The CFTC complaint does not set forth allegations that bring the claim within, or potentially within, the risks covered by the bonds. See La Rotunda v. Royal Globe Insurance Co. (1980), 87 Ill. App. 3d 446, 408 N.E.2d 928.

The cases relied upon by Rosenthal involve indemnification for attorney fees spent in defending a claim which if proven would have been covered by the fidelity bond at issue there. (H.S. Equities, Inc. v. Hartford Accident & Indemnity Co. (S.D.N.Y. 1978), 464 F. Supp. 83, 87; First National Bank v. Fidelity & Casualty Co. (5th Cir. 1981), 634 F.2d 1000, 1003.) The fidelity bond in the case at bar provides indemnification for attorney fees only in the defense of claims brought against the insured “with respect to which the insured establishes that the act or acts which occurred would entitle the Insured to recovery under this bond *** if any loss resulted therefrom.” Although a party against whom a motion for summary judgment has been filed need not prove his case at this preliminary stage, he is required to present some factual basis that would arguably entitle him to a judgment under the applicable law. (Martin v. American Legion Post No. 78b (1978), 66 Ill. App. 3d 116, 383 N.E.2d 672.) The CFTC complaint is the only evidence in the record on what acts are alleged to have occurred. Since the allegations of the complaint, if proven, would have found Rosenthal’s partners responsible for causing the dishonest activities of the employees, Rosenthal is not entitled to indemnity under the bonds for fees spent in defending its partners. The trial court did not err in entering summary judgment for INA on this issue.

On cross-appeal, INA contends that the trial court erred in entering judgment in Rosenthal’s favor on the claim of Marie Auditore. Auditore filed suit in 1976 alleging that Rosenthal salesmen had stolen money she deposited with Rosenthal. Auditore sought $44,488 plus exemplary damages. The Federal district court entered judgment in her favor of $51,000. Rosenthal appealed and was granted a retrial. On retrial the court awarded Auditore $66,099. In the court below Rosenthal requested a declaratory judgment finding that INA must indemnify Rosenthal for the amount of the second judgment and for attorney fees spent in defending the claim. The circuit court awarded Rosenthal $50,000 plus attorney fees of $73,000.

INA first contends that the Auditore claim, although alleging employee dishonesty within the coverage of the bonds, is not covered because Rosenthal failed to give INA timely notice of the claim. INA argues that Auditore filed her claim in December 1976 but Rosenthal did not provide written notice of the claim until April 1978. Rosenthal contends that the trial court properly granted summary judgment on the Auditore loss in light of INA’s admission that the claim was covered. During discovery Rosenthal obtained a memorandum written by INA’s claim manager. The memorandum stated in regard to the Audi-tore claim, “it is our opinion that the loss is covered.”

Generally, any statement made by a party or in his behalf which is inconsistent to his position in litigation may be introduced into evidence against him. (Quincy Trading Post, Inc. v. Department of Revenue (1973), 12 Ill. App. 3d 725, 298 N.E.2d 789; Nelson v. Union Wire Rope Corp. (1964), 31 Ill. 2d 69, 199 N.E.2d 769.) Under the facts of this case, the trial court did not err in finding INA liable for the Auditore claim.

INA further contends that the trial court erred in granting Rosen-thal an award in excess of the bonds, $50,000 liability limit per occurrence. The bonds provide that indemnity for court costs and attorney fees shall be “a part of and not in addition to the amount of this bond ***.” Rosenthal argues that its recovery is not limited by the amount of coverage provided by the bonds in this instance because INA acted in such bad faith in refusing to cooperate with Rosenthal while internally acknowledging that the loss was covered. Affidavits filed by Ro-senthal assert that prior to the Auditore trial Rosenthal discussed the claim with INA and gave INA access to its files on the claim, yet INA neither acknowledged nor denied that the claim was covered. Also, Rosenthal told INA that Auditore would probably accept a settlement before trial in a figure within the bonds’ limits, yet INA refused to take part in settlement negotiations and did not even answer Rosen-thal’s letters during crucial periods of the case.

In support of its position, Rosenthal cites several cases in which courts have held that where an insurer in bad faith refuses to settle a lawsuit against its insured, the insurer exposes itself to liability under the insurance policy without regard to the policy’s limits. (Olympia Fields Country Club v. Bankers Indemnity Insurance Co. (1945), 325 Ill. App. 649, 60 N.E.2d 896; Wolfberg v. Prudence Mutual Casualty Co. (1968), 98 Ill. App. 2d 190, 195, 240 N.E.2d 175, 178.) INA asserts, however, that these cases are inapposite because they arose under liability policies containing duty to defend clauses and not, as in the present case, under an indemnity policy. We agree.

Rosenthal has conceded that the fidelity bonds do not obligate INA to defend or to settle the claims against its insured. Rosenthal has not shown us how INA breached its contract. INA’s failure to cooperate with Rosenthal’s defense of the claim under the circumstances did not expose INA to liability in excess of its policy limits.

For the foregoing reasons, the award of $50,000 to Rosenthal on the claim of Marie Auditore is affirmed. The award of $73,Ill.79 for attorney fees on the Auditore claim is reversed. The denial of attorney fees for the defense of the CFTC action is affirmed. The denial of coverage under the bonds for claims discovered by Rosenthal after the effective date of the January 8, 1977, amendment is affirmed. The denial of coverage to claims discovered prior to the effective date of the amendment is vacated and remanded.

Affirmed in part, reversed in part and remanded for further proceedings consistent with this opinion.

BUCKLEY, P.J., and GOLDBERG, J., concur.