author: JUSTICE MILLER

text:
    TERRANCE L. JOHNSON, Plaintiff-Appellee, v. GENE’S SUPERMARKET, INC., et al., Defendants-Appellants.
    Fourth District
    No. 4 — 82—0806
    Opinion filed August 23, 1983.

      Jefferson Lewis and Nolan Lipsky, both of Petersburg, for appellants.
    Jeffrey B. Levens, of Sturm & Levens, of Springfield, for appellee.
   JUSTICE MILLER

delivered the opinion of the court:

Plaintiff brought an action for dissolution of defendant corporation, an accounting of the finances of defendant corporation, retaliatory discharge, breach of fiduciary duty, and breach of an employment contract. Prior to an adjudication on the merits, a preliminary injunction issued prohibiting defendants from taking any action indemnifying or reimbursing the individual defendants for their legal expenses in this cause. Defendants have taken an interlocutory appeal to that order.

We modify the injunction.

On July 7, 1982, plaintiff filed a multicount complaint seeking dissolution of defendant corporation, and actual and punitive damages against the corporation and against Roberta Johnson and Bradford Marquardt, both as individuals and corporate directors, for various acts against plaintiff. A motion to dismiss the complaint was denied, but plaintiff was ordered to amend the complaint so as to separately designate each cause of action.

A seven-count amended complaint was filed on November 5, 1982. The factual allegations of each count are basically the same. Plaintiff, Roberta Johnson, and Bradford Marquardt are each one-third owners of the common stock of Gene’s Supermarket, Inc. The three of them constitute the corporation’s board of directors. Prior to January 28, 1982, plaintiff acted as the corporations’ secretary and was employed as “overseer of corporate property and affairs” with a $500 weekly salary, use of a vehicle, and a bonus from corporate profits. Roberta Johnson and Bradford Marquardt were president and vice-president of the corporation, respectively. Beginning on October 10, 1981, board meetings were held and illicit and inaccurate minutes were prepared without plaintiff’s knowledge. Plaintiff’s employment was unlawfully terminated and defendants’ salaries were raised at these meetings. Roberta Johnson has refused to let plaintiff see financial records, which he as a director and stockholder has a right to inspect. Plaintiff alleged he has thus unlawfully been excluded from effective participation in the corporation’s affairs and corporate assets are being wasted. Finally, plaintiff alleged that some of these actions have been taken to gain advantage for Roberta Johnson in a pending dissolution of marriage proceeding between her and plaintiff.

On October 12, 1982, plaintiff filed a petition for a “temporary” injunction. (The trial court treated it as a preliminary injunction, which is the appropriate term under section 11 — 102 of the Code of Civil Procedure (Ill. Rev. Stat. 1981, ch. 110, par. 11 — 102).) It alleged that on October 4, 1982, plaintiff received notice of a special meeting of the corporation’s stockholders to consider adoption of a resolution which purported to indemnify defendants from “any and all liability and/or expenses” which they might incur in the present proceedings, and finding that they acted in good faith in all their actions upon which these proceedings are based. It also authorized the payment of the individual defendants’ legal fees as incurred. Plaintiff requested a preliminary injunction forbidding defendants “from taking any action designed to indemnify and reimburse” Roberta Johnson and Bradford Marquardt until an adjudication on the merits in this cause, and that otherwise, “waste” of corporate assets would occur.

On November 12, 1982, a hearing on the preliminary injunction was held. The parties stipulated that the corporation did in fact mail out the aforementioned notice and resolution. No evidence was presented, and the parties merely presented arguments regarding the application of the Business Corporation Act (Ill. Rev. Stat. 1981, ch. 32, par. 157.1 et seq.).

The trial court found that plaintiff had alleged the conditions necessary for the issuance of a preliminary injunction. The defendants were enjoined from taking any action “to indemnify and reimburse Roberta Johnson and Bradford Marquardt for attorney’s fees, court costs and any other expenses incurred by them in their defense of this lawsuit.” The defendants then filed a notice of interlocutory appeal.

To obtain a preliminary injunction the moving party must show: (1) He possesses a right which needs protection; (2) he has a substantial likelihood of succeeding on the merits; (3) he has no adequate remedy at law; (4) he will suffer irreparable injury without the injunction; and (5) in the absence of preliminary relief, he will incur a greater injury than would be received by the objector if the relief was granted. Illinois Consolidated Telephone Co. v. Aircall Communica tions, Inc. (1981), 101 Ill. App. 3d 767, 770, 428 N.E.2d 747, 750; Lums Restaurant Corp. v. Bloomington Restaurant Investments, Inc. (1981), 92 Ill. App. 3d 1143, 1145, 416 N.E.2d 751, 752.

On appeal, defendants contend that plaintiff failed to establish (1) a likelihood of success on the merits, (2) that he had no adequate remedy at law, and (3) that he would suffer immediate and irreparable harm without the preliminary relief.

First we dispose of plaintiff’s contention that defendants waived these objections by failing to raise them below. Defendants’ argument regarding success on the merits centers on the sufficiency of both the underlying complaint and the prayer for the injunction. Since the sufficiency of a complaint may be attacked at any time, defendants’ objection thereto was not waived. (See Biehn v. Tess (1950), 340 Ill. App. 140, 91 N.E.2d 160; Curran v. Harris Trust & Savings Bank (1952), 348 Ill. App. 210, 108 N.E.2d 729.) Also, defendants’ attorney argued below that plaintiff had an adequate remedy at law and would not be irreparably harmed because of an undertaking the individual defendants would be required to sign before any funds were dispersed. We conclude that the issues raised on appeal are properly before us.

The individual counts of the underlying complaint seek, in summary, the following remedies:

Count I. Appointment of a receiver, liquidation of the corporation, and an injunction prohibiting the individual defendants from acting for the corporation.

Count II and III. Actual damages from the corporation and punitive damages from the individual defendants for retaliatory discharge.

Count III. An injunction requiring the corporation to rehire plaintiff.

Count IV. An accounting from the individual defendants for all money received by them from the corporation since January 1, 1981, and payment to plaintiff of all sums due him.

Count V. Compensatory and punitive damages from the individual defendants for breach of a fiduciary duty which they, as controlling shareholders, owed plaintiff.

Counts VI and VII. Damages from the corporation for breach of an employment contract and an injunction requiring the corporation to rehire the plaintiff.

Defendants concede that all of plaintiff’s well-pleaded facts must be taken as true since an answer to the complaint was not yet filed at the time of the hearing. Sports Unlimited, Inc. v. Scotch & Sirlion of Woodfield, Inc. (1978), 58 Ill. App. 3d 579, 374 N.E.2d 916.

Defendants first argue that only count II pertains solely to the individual defendants in their capacities as officers and directors (count V being based on their status as shareholders), and that count II fails to state a cause of action. Therefore, they conclude that there is no basis on which to grant plaintiff relief and he has not demonstrated the likelihood of success on the merits. Defendants have inexplicably ignored counts I and IV, where relief is being sought against the individual defendants as directors, as well as the corporation. Inasmuch as counts I and IV have no facial defects and the factual allegations must be taken as true, we conclude that plaintiff has demonstrated a likelihood of success on the merits.

The most serious issue raised on appeal is whether the plaintiff has an adequate remedy at law and has demonstrated irreparable injury within the context of the statutory provision for corporate indemnification. Indemnification of corporate officers, directors, employees, and agents is provided for in section 42.12 of the Business Corporation Act (Ill. Rev. Stat. 1981, ch. 32, par. 157.42 — 12). This section is made up of seven paragraphs, which in sum respectively provide:

(a) A corporation may indemnify certain specified parties for third party actions when a requisite standard of conduct is met, whether or not the litigant has been successful on the merits.

(b) A corporation may indemnify certain specified parties for derivative actions when a requisite standard of conduct is met, whether or not the litigant has been successful on the merits.

(c) A corporation must indemnify the person referred to in (a) and (b) above under certain circumstances when the litigant has been “successful on the merits or otherwise.”

(d) The procedure by which an indemnification under (a) or (b) may be authorized.

(e) The procedure by which a corporation may authorize the advancement of funds for legal expenses upon receipt by the corporation of an undertaking that such expenses will be repaid by the person on whose behalf the funds were expended, unless it shall ultimately be determined that he is entitled to be indemnified.

(f) The statute does not exclude other rights to indemnification.

(g) A corporation may purchase liability insurance for its officers, directors, etc.

Defendants’ argument that plaintiff has an adequate remedy of law and has not demonstrated that he will suffer irreparable injury in the absence of a preliminary injunction is based on the following propositions:

(1) The indemnification procedure that defendants intend to follow is authorized by statute.

(2) The proposed resolution and the statute require that before they receive any funds, the individual defendants sign an undertaking to reimburse the corporation, if it is ultimately found that they are not entitled to be indemnified by the corporation. Thus, if the plaintiff does win on the merits, the corporation can enforce the undertakings.

(3) Paragraph (d) of the indemnification statute, by providing “unless ordered by a court,” authorizes a court to determine whether an indemnification is proper, thus triggering the enforcement of the undertakings.

(4) Plaintiff has not alleged that the individual defendants are insolvent, so it must be presumed that they can repay any undertakings which they sign. (See Goldblatt Brothers, Inc. v. Sixty-Third & Halstead Realty Co. (1949), 338 Ill. App. 543, 550, 88 N.E.2d 100,104.)

We come to the same conclusion as the defendants, but because of a confusion in terminology and ambiguity in the statute, the proposed corporate resolution, and the injunction, we find it necessary to allow the injunction to stand with modification. The resolution of the issue requires a close examination of the interrelationship between paragraphs (d) and (e) of the indemnification statute. They provide, in pertinent part:

“(d) Any indemnification under paragraphs (a) and (b) (unless ordered by a court) shall be made by the corporation only as authorized in the specific case, upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in paragraphs (a) or (b). Such determination shall be made [by disinterested members of the board of directors, independent legal counsel, or stockholders].
(e) Expenses incurred in defending a civil or criminal action, suit or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding, as authorized by the board of directors in the specific case, upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount, unless it shall ultimately be determined that he is entitled to be indemnified by the corporation as authorized in this Section.” Ill. Rev. Stat. 1981, ch. 32, pars. 157.42-12(d), (e).

The proposed resolution purports to both indemnify 'the individual defendants and allow their legal expenses to be paid as incurred. Defendants’ argument assumes that even though an indemnification resolution, as provided in paragraph (d), has been passed, the individual defendants would receive no funds without first signing an undertaking as required in paragraph (e). In advancing this argument, defendants have apparently interpreted the statute to (1) allow funds to be advanced under paragraph (e) only if a finding has been made that the litigant has met the standard of conduct required by paragraphs (a) or (b) and (2) even though an indemnification resolution pursuant to paragraph (d) has been adopted, funds may be dispersed prior to some type of resolution of a dispute only if the litigant signs an undertaking as provided in paragraph (e).

We find paragraphs (d) and (e) to be completely independent and procedurally unrelated. There is nothing in the explicit language of the two paragraphs which makes one a precondition to the other. Paragraph (d) involves two steps. First, a determination as to the eligibility under the requisite standard of conduct for indemnification under (a) and (b); and second, an authorization of indemnification which includes a review of the reasonableness of the expenses and the financial ability of the corporation to make the payments. (See Changes in the Model Business Corporation Act Affecting Indemnification of Corporate Personnel, 36 Bus. Law. 99, 114 (1980).) We conclude there is no requirement that one being indemnified under paragraph (d) sign an undertaking to reimburse the corporation. Whether in fact either making a determination as to eligibility, or the authorization of the disbursement of funds, is appropriate prior to some degree of resolution of the underlying dispute, we need not and do not resolve at this time.

Paragraph (e) merely states that the board of directors may authorize an advancement of expenses, provided the requisite undertaking is signed by the litigant. Nothing in the paragraph limits the board of directors’ discretion. Indeed, there is less need, since, by the terms of the undertaking, any funds which are advanced must be repaid unless it is ultimately determined that the litigant is “entitled” to indemnification. We understand “entitled” to refer to when a litigant must be indemnified because he has been “successful” as defined in paragraph (c) or has been permissibly indemnified under (a) or (b).

Our conclusion that advancements of funds under paragraph (e) are not preconditioned by any finding required in paragraph (d) is buttressed by other authority. The Illinois indemnification provision was copied directly from the Delaware statute (Delaware Code Annotated, Title 8, sec. 145 (1982 cumulative supp.). (Transcription of House proceedings, May 18, 1977, at 58-62.) Section 4A of the Model Business Corporation Act (Model Act) (Sebring, Recent Legislative Changes in the Law of Indemnification of Directors, Officers and Others, 23 Bus. Law. 95, 111-13 (1967)) (hereinafter Sebring) provided in subsection (e) that expenses may be paid in advance of a final settlement of the legal dispute “as authorized in the manner provided in subsection (d).” (Emphasis added.) (The Delaware Code initially provided “as authorized by the board of directors in the manner provided in subsection (d).” (Emphasis added.) (Sebring, at 105.)) The comments and the Code make clear that in the Model Act subsection (e) required that the board make a finding, on the basis of facts available to them, that the necessary standards of conduct for indemnification had been met before advancements could be made. Sebring, at 105.

The Model Act has since been revised because “in many instances it proved unworkable” because of its requirement that a determination be made in advance that a person had met a certain standard of conduct. (Changes in the Model Business Corporation Act Affecting Indemnification of Corporate Personnel, 36 Bus. Law. 99, 114 (1980).) The new provisions in the Model Act require a finding that the facts known at the time of the approval of the advancement do not establish that indemnification is impermissible. There is no longer any tie in the Model Act between the sections which were old subsections (d) and (e).

Sometime between its initial adoption of language similar to the Model Act and 1975, Delaware changed its version of the Model Act subsection (e) to read “as authorized by the board of directors in the specific case,” thus omitting the link to subsection (d). This was how the Delaware statute read when copied by Illinois.

There are seven States besides Illinois and Delaware which have, or at one time had, adopted the same language: Alaska, Kansas, Maine, Missouri, Oklahoma, (Model Business Corporation Act Annotated sec. 5, at 56 (1973 Supp.); Maryland and Ohio (Model Business Corporation Act Annotated sec. 5, at 90 (1977 Supp.)). Maryland initially adopted the Model Act version. Then in 1976 it adopted the language in the present Illinois and Delaware codes. The Maryland annotated statutes provided this comment:

“Chapter 567, Acts of 1976, amended §2 — 418(f) [corresponding to paragraph (e) of the Illinois statute] to simplify the procedure for advances. As amended, the section provides that advances against expenses incurred by a corporate officer may be made by the corporation, without any prior determination procedure, if the corporation receives an undertaking by the officer to repay the advance should it not be ultimately determined that he is entitled to be indemnified. Ultimate indemnification still requires the necessary findings required by §2 — 418(e) [corresponding to paragraph (d) of the Illinois statute].” (Emphasis added.) Md. Corp. & Ass’ns Code Ann. sec. 2 — 418, Comment (1982 Supp.).

From the comments to the Model Act and the Maryland annotated statutes, we conclude that the language used in paragraph (e) of the Illinois indemnification statute was adopted in order to avoid the problems of requiring a determination of whether a particular standard of conduct was met before resolution of the dispute. Therefore, there are no statutory preconditions to a board of directors authorizing the advancement of funds under paragraph (e).

Finally, we address one other misconstruction of the statute. Defendants argue that the term “unless ordered by a court” found in paragraph (d) empowers a court to prohibit a permissive indemnification. While a court may find grounds to limit indemnification, the authority does not come from paragraph (d). Rather, “unless ordered by a court” merely provides another procedure whereby a litigant may obtain permissive indemnification from a corporation.

The disputed injunction prohibits any action “to indemnify and reimburse” the individual defendants’ litigation expenses. It is unclear whether the trial court meant to prohibit the advancement of funds for payments of legal expenses as they are incurred. Defendants have argued that because of the undertaking they will be required to sign in order to receive any funds from the corporation, plaintiff has an adequate remedy at law and will not be irreparably harmed if it is ultimately determined that the individual defendants are not to be indemnified. Defendants have not argued that plaintiff would not be irreparably harmed if the individual defendants were to be indemnified under paragraph (d), where no undertaking is required to be signed, nor have they argued they have met the criteria under (a) or (b). Therefore, defendants’ objection to the injunction will be met if the injunction is modified so as to allow advancement of funds under paragraph (e) while still prohibiting indemnification under paragraph (d). Because of the peculiar circumstances and conflict of interest involved in the setting of a close corporation, we believe the trial court’s preliminary enjoining of indemnification under paragraph (d), until resolution of the underlying dispute, is well founded. Inasmuch as the corporation may immediately enforce the undertaking required under (e) to retrieve any advanced funds, if the individual defendants are not “successful on the merits or otherwise,” plaintiff, through the corporation, has an adequate remedy at law if the individual defendants are ultimately found not to be entitled to indemnification.

The plaintiff only requested an injunction forbidding “indemnification or reimbursement” under (d) and on appeal does not contest the power of the corporation to advance funds, after the signing of the required undertaking, under (e). Therefore, the cause is remanded to the trial court with the instruction that the injunction be modified so as to allow the advancement of legal expenses under paragraph (e), but prohibit indemnification under paragraph (d), as provided in section 42.12 of the Business Corporation Act (Ill. Rev. Stat. 1981, ch. 32, par. 157.42 — 12), pendente lite.

Affirmed as modified. Remanded with directions.

TRAPP and GREEN, JJ., concur.


source: Caselaw Access Project

author: JUSTICE HEIPLE

license: Public Domain

text:
    KNOX COLLEGE, Plaintiff-Appellant, v. CELOTEX CORPORATION, Defendant-Appellee.
    Third District
    No. 82 — 790
    Opinion filed July 8, 1983.
    Modified on denial of rehearing September 19, 1983.

      George V. Bobrinskoy, Jr., and Michele Odorizzi, both of Mayer, Brown & Platt, of Chicago, for appellant.
    Douglas D. Mustain, of West, Neagle & Williamson, of Galesburg, Clausen, Miller, Gorman, Caffrey & Witous, P.C., of Chicago, and Love, Beal, Pratt, & Stombaugh, of Monmouth (James T. Ferrini, David B. McAfee, and Robert H. Mittelman, of counsel), for appellee.
   JUSTICE HEIPLE

delivered the opinion of the court:

This is the second time this case has been before this court. The first time was on plaintiff’s appeal from the trial court’s dismissal of its complaint on the ground that the cause of action was barred by the statute of limitations. We reversed. (Knox College v. Celotex Corp. (1980), 85 Ill. App. 3d 714.) The supreme court reversed our decision holding that the statute of limitations defense raised questions of fact which must be determined by the trier of fact. Knox College v. Celotex Corp. (1981), 88 Ill. 2d 407.

On remand, the defendant moved to dismiss the complaint for failure to state a cause of action. The court granted the motion with prejudice and the plaintiff appeals. Facts which are essential to an understanding of the issues raised herein will be presented as needed.

The plaintiff first makes the rather incredible argument that the supreme court decision on appeal foreclosed the trial court from taking any action on remand other than permitting the statute of limitations defense to go to the jury. Therefore, the trial court had no authority to consider and grant the defendant’s motion to dismiss.

The supreme court mandate in this case stated only that the trier of fact must determine the time when the statute of limitations started to run. To say that this order prevents the trial court from ruling on the sufficiency of the complaint is nonsense. If the plaintiff’s argument were given credence, then the trial court would also be without authority to order a directed verdict if the plaintiff failed to make out a prima facie case. There is no merit to this argument.

The plaintiff also argues that the doctrine of res judicata barred the trial court from considering the defendant’s challenge to the sufficiency of the pleadings. The plaintiff contends that the defendant could not raise this issue on remand because the issue could have been settled had the defendant presented its pleading objections during the previous appeals.

This is a correct statement of the general rule that when an action is appealed and questions of law are decided, all questions relating to the same subject matter which could have been presented are res judicata whether they were presented or not. Schneiderman v. Interstate Transit Lines, Inc. (1948), 401 Ill. 172, 175.

However, the above rule does not apply in the present case since the failure of a complaint to state a cause of action can be raised at any time. (People ex rel. Difanis v. Futía (1978), 56 Ill. App. 3d 920.) Since the defendant’s objection does not concern mere pleading technicalities but does in fact challenge the legal sufficiency of the complaint, the issue could be raised again in the trial court on remand.

Regardless of whether there were adequate grounds for dismissing counts I, II, and III of the complaint, the plaintiff argues that it should have been granted leave to amend and that the trial court erred in striking the complaint with prejudice. The plaintiff argues that had it been permitted to file an amended complaint, a good cause of action could have been stated. However, the record indicates that the plaintiff made no attempt to offer an amended complaint or demonstrate to the court how the pleading defects could have been cured. Because the plaintiff failed to offer an amended complaint prior to entry of the final order dismissing the complaint with prejudice, it is now in no position to challenge the dismissal. See Flannery v. Marathon Oil Co. (1979), 75 Ill. App. 3d 690.

The plaintiff argues that any attempt to amend would have been futile because the complaint was dismissed with prejudice. We find that the plaintiff was given ample time to offer an amended complaint or to ask the court to reconsider its ruling.

Following a hearing on the defendant’s motion to strike, the court filed a memorandum opinion indicating that counts I, II, and III were stricken with prejudice. However, the final order dismissing these counts was not entered for an additional 15 days. While this time elapsed, the plaintiff did nothing. Under these circumstances, the fact that the memorandum opinion recited that the counts were stricken with prejudice does not relieve the plaintiff from its obligation to attempt to cure the defective complaint at the trial level. By choosing not to act, the plaintiff elected to stand on the complaint.

This is the second time during the course of this litigation that the plaintiff has made this fatal mistake. The plaintiff also elected not to amend when the trial court dismissed various counts of the original complaint naming other defendants. On appeal, the supreme court held that since it was the plaintiff’s decision not to amend, it could not say that the trial court abused its discretion in striking the complaint. (Knox College v. Celotex Corp. (1981), 88 Ill. 2d 407, 422.) We reach the same conclusion here. By electing to stand on its second amended complaint, the plaintiff is in no position to argue that the trial court abused its discretion in striking the complaint with prejudice.

The next issue is whether the trial court had sufficient grounds for striking counts I, II and III of the complaint. This was an action for misrepresentation. The defendant had supplied roofing materials for use in the construction of a new math and science center on the plaintiff’s college campus. The roof was later found to be defective. The plaintiff sued charging that the defendant had misrepresented the quality and durability of the roofing materials.

Counts I and III seek recovery based on a theory of negligent misrepresentation. These counts were stricken by the trial court for a number of reasons all of which are unimportant since we find that under the facts of this case, no cause of action for negligent misrepresentation can be stated.

In Illinois, there is no cause of action for negligent misrepresentation unless the defendant is in the business of supplying information for the guidance of others in their business transactions with third parties. Black, Jackson & Simmons Insurance Brokerage, Inc. v. International Business Machines Corp. (1982), 109 Ill. App. 3d 132, 135; see Moorman Manufacturing Co. v. National Tank Co. (1982), 91 Ill. 2d 69.

The defendant here is not engaged in the business of supplying information but is simply a manufacturer and seller of roofing materials. Therefore, the court did not err in striking counts I and III.

Count II of the complaint seeks recovery based on a theory of fraudulent or intentional misrepresentation. The trial court struck this count, finding that:

“Here again we have a long narrative account replete with conclusions without informing the defendant just what the fradulent [sic] statements were or how they are tied to the plaintiff.
Also Count II contains two causes of action — one sounding in fraud and the other in willful and wanton negligence.”

Although we do not agree with the court’s finding that count II states two causes of action since we believe that the allegation of wilful and wanton conduct was merely a weak attempt to support a claim for punitive damages, it is our opinion that count II was properly dismissed for other reasons.

In support of its complaint, the plaintiff cites the following two sections of the Code of Civil Procedure: section 2 — 603(c): “Pleadings shall be liberally construed with a view to doing substantial justice between the parties” (Ill. Rev. Stat. 1981, ch. 110, par. 2 — 603(c)); section 2 — 612(b): “No pleading is bad in substance which contains such information as reasonably informs the opposite party of the nature of the claim or defense which he or she is called upon to meet” (Ill. Rev. Stat. 1981, ch. 110, par. 2-612(b)).

Even a “liberal reading” of the plaintiff’s complaint will not cure its many faults. Count II is legally insufficient due to a number of defects in form and substance the cumulative effect of which is to render the complaint incapable of reasonably informing the defendant of the nature of the claim it is called upon to meet.

The elements of fraudulent misrepresentation are haphazardly set out in 28 paragraphs and subparagraphs which make up nine pages of text. The allegations consist of excessively verbose narratives replete with legal conclusions which are not supported by sufficient facts. In order for the defendant to be able to answer the pleadings and plan a defense, it would virtually have to rewrite the complaint. The defendant is not required to do so.

It is unfortunate that the plaintiff chose not to amend since we believe that a good cause of action could have been stated after extensive amendment. But as we have already noted, by not tendering an amended complaint, the plaintiff invited the trial court to dismiss the complaint with prejudice. Therefore, we have no choice but to affirm the judgment of the circuit court of Knox County.

Affirmed.

ALLOY and SCOTT, JJ., concur.


author: JUSTICE O’CONNOR

text:
    GERSON ELECTRIC CONSTRUCTION CO., Plaintiff-Appellant, v. HONEYWELL, INC., Defendant-Appellee.
    First District (3rd Division)
    No. 81 — 2643
    Opinion filed August 10, 1983.

      Howard P. Kamin and David E. Muschler, both of Lawrence, Lawrence, Kamin & Saunders, of Chicago, for appellant.
    Terrence E. Kiwala and Margaret S. Garvey, both of Rooks, Pitts, Fullagar & Poust, of Chicago, for appellee.
   JUSTICE O’CONNOR

delivered the opinion of the court:

Plaintiff, an electrical contractor, brought this action in two counts against defendant, an electrical subcontractor and supplier, for defendant’s refusal to perform pursuant to a bid which it submitted to plaintiff for work on a certain public construction project. Plaintiff sued under contract and promissory estoppel, alleging that the nature of the subject project made it impossible to substitute another subcontractor once the time for submitting bids on the prime contract had elapsed; that it was the low bidder and its bid would therefore have been accepted had defendant not refused to perform at its specified bid price. Plaintiff was subsequently allowed to withdraw its bid on the prime contract, and brought this action to recover its lost profits. The trial court granted the defendant’s motion to dismiss both counts. We affirm in part, reverse in part and remand for further proceedings.

The following facts are alleged in plaintiff’s amended complaint: Plaintiff intended to submit a bid for the electrical work, together with security, communication and audio visual systems which was required pursuant to certain specifications (SCAV work) to the Cook County Institute of Forensic Medicine, office of the medical examiner (the Project). Plaintiff discussed the SCAV work with representatives of defendant corporation for the purpose of having defendant submit a bid to plaintiff for the work. Along with its bid on the Project, plaintiff was required to submit a design for the proposed system for the SCAV work to be supplied by its subcontractor. Prior to plaintiff’s bid, defendant submitted to plaintiff a SCAV design which included items of equipment manufactured by defendant. On the morning that bids on the Project were due, defendant submitted an oral bid to plaintiff to perform the SCAV work for $127,500. Plaintiff included defendant’s bid in its own bid, which it submitted that day, along with defendant’s SCAV design. When the bids to the owner were opened, it is alleged that plaintiff was the low bidder and entitled to the prime contract. Defendant subsequently refused to perform the SCAV work for its bid price, however, as a result of which plaintiff was forced to withdraw its own bid because it could not perform the prime contract without defendant’s SCAV design which included equipment manufactured by defendant, nor could it substitute another subcontractor to complete the work according to defendant’s design. Plaintiff alleges lost profits in the amount of $95,000 as a result of defendant’s failure to perform pursuant to its bid.

On appeal, plaintiff argues that a contract existed between the parties which was breached by defendant’s refusal to perform in accordance with its bid, and alternatively that promissory estoppel applies to the instant situation.

Initially, defendant points to the fact that nowhere does plaintiff allege its refusal to perform under any circumstances; rather, the amended complaint states only that defendant refused to perform at its bid price of $127,500 and, in fact, plaintiff’s original complaint alleged that defendant demanded $314,500 for the work. A “reasonable inference,” defendant argues, is that it would have performed the work at the higher price had plaintiff proceeded with its bid on the Project and in fact been awarded the prime contract. Under these circumstances, there is no question but that a contract would have been formed between the parties. While this is an accepted practice in the industry, based on a policy of mitigating damages (see, i.e., J. Calimari & J. Perillo, Contracts 538-40 (2d ed. 1977)), the conduct suggested by defendant would be totally unrealistic under the instant facts; had plaintiff performed pursuant to the amount allegedly demanded by defendant, its claim (and ensuing cause of action against defendant) would have amounted to $217,000, greater than two times the amount it now seeks in lost profits.

Based on the record before us, we believe that the trial court correctly dismissed count I of plaintiff’s complaint for breach of contract where, as here, plaintiff merely used defendant’s bid in submitting its own bid and did not go on to perform the prime contract. (See, i.e., Premier Electrical Construction Co. v. Miller-Davis Co. (7th Cir. 1970), 422 F.2d 1132, 1135, cert. denied (1970), 400 U.S. 828, 27 L. Ed. 2d 58, 91 S. Ct. 56, and cases cited therein; Janke Construction Co. v. Vulcan Materials Co. (W.D. Wis. 1974), 386 F. Supp. 687, aff’d (7th Cir. 1976), 527 F.2d 772.) Nevertheless, we believe that, accepting all well-pleaded facts as true, plaintiff would be entitled to recover under the theory of promissory estoppel and that the trial court therefore erred in dismissing count II of plaintiff’s complaint.

The application of promissory estoppel requires that there be a promise unambiguous in terms; that there be reliance on such promise by the party to whom it is made; that this reliance be expected and foreseeable by the party making the promise; and that the one to whom the promise is made in fact relies upon it to his injury. (S. M. Wilson & Co. v. Prepakt Concrete Co. (1974), 23 Ill. App. 3d 137, 139, 318 N.E.2d 722; see also Restatement (Second) of Contracts sec. 90 (1981).) Under the Restatement view, the promissor would be affected only by reliance which he does or should foresee, and enforcement must be necessary to avoid injustice. (Restatement (Second) of Contracts sec. 90, comment b (1981).) The facts before us clearly present such a situation. The only remaining question, therefore, is whether plaintiff can recover under this doctrine where, as here, the only damages alleged are loss of profits. We believe that the circumstances before us require such a finding.

Defendant argues that because plaintiff was not ultimately compelled to perform the prime contract, it did not suffer the requisite “detrimental reliance” for recovery under promissory estoppel. Defendant relies on numerous construction cases from other jurisdictions in which the doctrine has been applied, in each of which the subcontractor repudiated his bid after the general contractor was awarded the prime contract. While that is the more common situation in construction bid cases invoking promissory estoppel, we do not find any of the precedents cited by defendant to undermine plaintiff’s position here; none of these cases requires an award of the prime contract as a precondition to recovery under the doctrine, nor do we believe that such a uniform restriction was intended by its drafters. We therefore reject defendant’s argument that lost profits are simply not recoverable under any circumstances in which the doctrine is applied. Rather, as recognized by the court in Hoffman v. Red Owl Stores, Inc. (1965), 26 Wis. 2d 683, 133 N.W.2d 267, a case relied upon by defendant, no single approach to damages is appropriate in all situations in which the doctrine is invoked, but damages should be only such as in the opinion of the court are necessary to prevent injustice. Such a policy decision necessarily embraces an element of discretion. (26 Wis. 2d 683, 698, 133 N.W.2d 267, 275.) The court went on to warn that “[mjechanical or rule of thumb approaches to the damage problem should be avoided.” 26 Wis. 2d 683, 701, 133 N.W.2d 267, 276; see also Chrysler Corp. v. Quimby (1958), 51 Del. 264,144 A.2d 123.

Finally, the Seventh Circuit specifically rejected the restrictive, approach urged by defendant here and authorized the award of lost profits in promissory estoppel cases in Walters v. Marathon Oil Co. (7th Cir. 1981), 642 F.2d 1098. Plaintiffs in Walters had purchased a service station in reliance upon the promises and representations of defendant with regard to the furnishing of gasoline products. Defendant then refused to execute the agreement to furnish such products and plaintiffs sued, alleging lost profits as a direct result of their reliance on defendant’s promise. Defendant argued that since the value of plaintiffs’ investment had appreciated, they could recoup all that they had spent in reliance on defendant’s promise. The court rejected defendant’s argument,. finding that where plaintiffs had suffered a loss of profits as a direct result of their reliance upon the promise made by defendant, the amount of lost profits was ascertained with reasonable certainty and that plaintiffs had taken reasonable steps to mitigate their damages, an award of damages based on lost profits was appropriate in order to do complete justice.

Based on the foregoing, we find that plaintiff has at least stated a cause of action in promissory estoppel and should be given the opportunity to prove its alleged damages at trial.

The dismissal of count I is affirmed. The dismissal of count II is reversed and the cause remanded for further proceedings.

Affirmed in part, reversed in part and remanded.

McNAMARA, P.J., and McGILLICUDDY, J., concur.


author: JUSTICE LINN

text:
      In re MARRIAGE OF RICHARD Y. SEVON, Petitioner and Counterrespondent-Appellant, and WANDA I. SEVON, Respondent and Counterpetitioner-Appellee.
    First District (4th Division)
    Nos. 82 — 971, 82 — 1804, 82 — 2612 cons.
    Opinion filed August 25, 1983.

      Leonard T. Timpone, of Timpone & Rickelman, Ltd., of Chicago, for appellant.
    Gary E. Dienstag, of Springer, Casey, Haas, Dienstag & Silverman, of Chicago, and Michael H. Minton, of Facchini & Minton, of Schaumburg, for appellee.
   JUSTICE LINN

delivered the opinion of the court:

Richard Sevon filed a petition for dissolution of marriage on August 19, 1980, in the circuit court of Cook County. Wanda Sevon filed an answer and counterpetition on September 12, 1980. Following a contested trial, a judgment of dissolution of marriage was entered on December 31, 1981; a supplemental judgment of dissolution was entered on February 4, 1982. Richard filed a notice of appeal from the supplemental judgment, and on September 30, 1982, the trial court awarded Wanda $4,000 in attorney fees to defend the appeal. Richard also filed a notice of appeal of this fee award. By order of this court, the appeals have been consolidated.

Richard argues on appeal that the distribution of marital property was inequitable in that (1) the trial court improperly evaluated the economic circumstances, standard of living, and available income of each of the parties; (2) the award of maintenance to Wanda was excessive; and (3) the trial court should not have considered a judgment entered against Richard for failure to pay court-ordered temporary maintenance and should have entered a judgment against Wanda for dissipation of the marital assets. He also argues (4) that the trial court committed error in refusing to vacate the fee award on his motion, which claimed he was not given notice of the hearing on Wanda’s petition for fees; and (5) that the trial court erred in ordering him to pay fees incurred by Wanda in defending his appeal where there was no evidence that he was financially able to pay.

We affirm in part and reverse in part.

Facts

Wanda and Richard Sevon were married in 1954. They had two children, both of whom are now adults. They lived in Des Plaines in a home that, at the time of trial, had a net equity value of $133,550. In July 1980, Wanda discovered that Richard was having an affair with another woman. Wanda became distraught; she was hospitalized for a period of 30 days, and has since been under the care of her doctor. Richard moved out of the marital home at the time his involvement with the other woman was disclosed.

In October 1980, the circuit court awarded Wanda exclusive occupancy of the home and ordered Richard to pay Wanda a lump sum of $800 and also to pay all “bills relating to the marital premises” as temporary maintenance. Richard never made such payments. At the time of trial the accrued arrearage was $7,811.32; it continued to increase until the supplemental judgment of dissolution ordered that it would be satisfied through the court’s award of the marital home to Wanda.

Richard is self-employed as a builder. His petition for dissolution stated that he earned approximately $36,000 per year. The trial court’s supplemental judgment of dissolution recites that in an affidavit dated January 20, 1981, Richard stated his wages were $1,500 per month. Between January and August, 1980, he deposited $29,966 in a bank account having an existing balance of $2,880. Richard’s construction company had gross receipts of $40,000 in a 20-month period, and Richard claimed accounts receivable of an additional $1,200. He testified that his income in 1981 was about $1,200; he was working at the time of trial and was bidding on other construction jobs. The trial court noted “with disbelief” Richard’s testimony that, beginning in August 1980, he had obtained three $10,000 bank loans and also borrowed money from his parents.

The parties stipulated that during the 27-year marriage Wanda had performed all the services of a homemaker and raised two children. Wanda testified that she performed these services without assistance from Richard. She also worked part time for United Airlines throughout the 27 years. In 1981 she earned about $6,000. During the marriage she had borrowed between $20,000 and $30,000 from her credit union to help Richard’s business. Wanda was 46 years old at the time of trial. Her employer’s pension plan will pay her $222 per month at age 65. Her biweekly income from her job and from rent received from two boarders in her house was $348.24.

After Richard moved out in July 1980, he made three mortgage payments; Wanda paid all the other expenses for the maintenance of the home. To meet these and her personal and medical expenses, Wanda asserts, she spent $14,000 given to her by Richard in February 1980 and the $10,000 in her credit union account. When questioned on cross-examination about her use of marital funds for these purposes she testified that Richard had threatened to “leave her penniless.” The trial court found Wanda’s expenditures to be “necessary and appropriate *** legitimate family expenses.”

The trial court awarded the marital residence to Wanda in lieu of maintenance. The court noted that “[Wanda] is employable only at a low income as compared to [her] standard of living and that maintenance would be appropriate.” However, “[t]he court finds that the distribution of property is appropriate in this case in lieu of an award of maintenance in that the court finds [Richard] to be an unreliable source of income due to his history of noncompliance, *** and [his] irregular income coupled with his exhibited ability to borrow large amounts of money from banking institutions while refusing to pay any of said monies to [Wanda] pursuant to court orders.”

The court also awarded a 1977 Cadillac, $2,500, and her pension to Wanda; and a 1978 Buick and an insurance policy having $1,500 cash value to Richard. The trial judge explained his findings as follows: “[Richard] is able to maintain his present needs and his opportunity for the acquisition of income and assets in the future far outweighs that of [Wanda]. The court finds [Richard] to be presently employable and able to support himself adequately. The fact that [he] indicated he has spent all of his money, the court deems irrelevant.”

Opinion

Richard maintains in this appeal that the trial court’s distribution of marital property was inequitable. He argues that the trial judge improperly evaluated the economic circumstances of the parties and consequently made an excessive award of maintenance to Wanda; he also claims that the trial judge should not have considered the judgment entered against him for failure to pay temporary maintenance as ordered and should have entered a judgment against Wanda for dissipation of the marital assets.

The latter claim is based on Richard’s contention that Wanda “secreted” the $24,000 she alleges she spent for personal and household expenses after Richard left the marital home in July 1980. However, this characterization of Wanda’s expenditures is not supported by the record, which indicates that Richard voluntarily transferred $14,000 to Wanda for her use in paying the family’s bills, as she had done throughout the marriage. The other $10,000 came from Wanda’s credit union account.

Dissipation of marital assets occurs when a spouse uses marital property for his or her own benefit for a purpose unrelated to the marriage while the marriage is breaking down. (Klingberg v. Klingberg (1979), 68 Ill. App. 3d 513, 386 N.E.2d 517.) The record contains a complete list of Wanda’s expenditures for her own support, including maintenance of the marital residence. The trial judge found that these expenditures were “necessary and appropriate *** legitimate family expenses,” and we agree because there is no evidence in the record to indicate that she spent the money for purposes unrelated to the marriage. Richard’s claim that the trial judge should have entered a judgment against Wanda for dissipation of marital assets is without merit.

Richard also claims, apparently as a corollary to the above argument, that the trial court should not have entered judgment against him for failure to pay court-ordered temporary maintenance because he “would have been able to make the household payments if [Wanda] had not improperly secreted the money from their joint account, and it is [she] who should be estopped from alleging the arrearages *** because she has unclean hands relating to the inability of [Richard] to pay.” In support of this statement Richard cites Mascenic v. Anderson (1977), 53 Ill. App. 3d 971, 369 N.E.2d 172, which held, in a situation totally unlike the case at bar, that the doctrine of unclean hands (misconduct on the part of a plaintiff that will defeat recovery in a court of equity, which was done in connection with the very transaction complained of and consisted of misconduct, fraud, or bad faith toward the defendant making the contention) did not operate to bar the relief requested. Richard fails to explain how Mascenic can be interpreted as support for his claim, and we find no authority in this precedent for application of the “clean hands” doctrine in the case at bar. Accordingly, we hold that the trial judge’s findings regarding both Wanda’s expenditures and Richard’s failure to pay temporary maintenance as ordered were proper.

We also disagree with Richard’s claim that the marital property was not distributed in just proportions. (Ill. Rev. Stat. 1979, ch. 40, par. 503(c).) Numerous Illinois decisions have recited the rule that distribution of marital property is a decision to be made in the sound discretion of the trial court, and a reviewing court will not reverse such a decision unless it reflects an abuse of discretion. (In re Marriage of Rothbardt (1981), 99 Ill. App. 3d 561, 425 N.E.2d 1146; In re Marriage of Peoples (1981), 96 Ill. App. 3d 94, 420 N.E.2d 1072; In re Marriage of McMahon (1980), 82 Ill. App. 3d 1126, 403 N.E.2d 730.) The requirement that division be just does not mean that division must be equal. In re Marriage of Aschwanden (1980), 82 Ill. 2d 31, 411 N.E.2d 238; In re Marriage of Pruitt (1981), 101 Ill. App. 3d 755, 428 N.E.2d 732.

“[B]y giving both spouses an interest in ‘marital property’ upon dissolution of marriage, the legislature sought to *** replace the concept of post-marital support through alimony with one of post-marital stability through a just distribution of marital property and assets.” (Kujawinski v. Kujawinski (1978), 71 Ill. 2d 563, 576, 376 N.E.2d 1382, 1388.) Thus, a trial court is encouraged to provide for a spouse’s needs through its distribution of marital property rather than through an award of maintenance. (In re Marriage of Rothbardt (1981), 99 Ill. App. 3d 561, 425 N.E.2d 1146; Schubert v. Schubert (1978), 66 Ill. App. 3d 29, 383 N.E.2d 266.) An unequal distribution of marital property in lieu of maintenance is appropriate in cases such as this one, in which the payor spouse has demonstrated his unreliability. Schasker v. Schasker (1975), 34 Ill. App. 3d 980, 341 N.E.2d 717.

In this case, the financial positions of the parties are not equal; Wanda is employed part time at a modest salary, and apparently has no special training that would enable her to increase her income significantly, while Richard has earned substantially larger amounts of money than Wanda has in the past, and possesses skills and experience that can enable him to do so in the future. Further, Wanda has experienced medical problems that may both increase her expenses and curtail her ability to work in the future. The trial judge found that Wanda’s low income compared to the standard of living she had experienced during the marriage made an award of maintenance appropriate, and that Richard’s past behavior made the award of the marital residence to Wanda in lieu of periodic maintenance payments appropriate. We agree.

“In determining whether the trial court abused its discretion, the question is *** did the trial court in the exercise of its discretion act arbitrarily without the employment of conscientious judgment or, in view of all the circumstances, exceed the bounds of reason and ignore recognized principles' of law so that substantial injustice resulted. This is another way of saying that discretion is abused only where no reasonable man would take the view adopted by the trial court. It would seem that if reasonable men could differ as to the propriety of the action taken by the trial court, then it cannot be said that the trial court abused its discretion.” (In re Marriage of Lee (1979), 78 Ill. App. 3d 1123, 1127, 398 N.E.2d 126, 129; see also In re Marriage of Hyland (1981), 95 Ill. App. 3d 31, 419 N.E.2d 662.) Applying this standard to the case at bar, we find no abuse of discretion in the distribution of the marital property.

We agree, however, with Richard’s argument that he should not have been ordered to pay attorney fees incurred by Wanda in defending this appeal because there is no evidence in the record to indicate he had the financial ability to pay these fees. The testimony at trial regarding Richard’s income and expenses was somewhat vague; it seems to indicate that both Richard and Wanda had exhausted their savings by the time of the trial. The trial judge labelled Richard’s income “irregular.” Wanda’s testimony at the hearing on her petition for fees that Richard was working appears to be hearsay; even if Wanda had personal knowledge that Richard was working at the time of the hearing, there is no evidence of Richard’s income in the record. The distribution of property following dissolution of the marriage gave the only signifiant marital asset, the marital residence, to Wanda. In short, there is no evidence that Richard possessed any assets other than an automobile and an insurance policy at the time the trial court ordered him to pay Wanda’s attorney fees.

The authority for allowance of fees on appeal is found in section 508(a)(3) of the Illinois Marriage and Dissolution of Marriage Act (Ill. Rev. Stat. 1979, ch. 40, par. 508(a)(3)). The allowance of attorney fees is a decision that rests within the sound discretion of the trial court, and .a fee award will not be reversed on appeal unless an abuse of discretion is shown. (Donnelley v. Donnelley (1980), 80 Ill. App. 3d 597, 400 N.E.2d 56; Gasperini v. Gasperini (1978), 57 Ill. App. 3d 578, 373 N.E.2d 576.) An award of fees is justified only where the party seeking the award has demonstrated his or her own inability to pay and the financial ability of the other spouse to do so. In re Marriage of Smith (1981), 100 Ill. App. 3d 1126, 427 N.E.2d 1262; In re Marriage of De Frates (1980), 91 Ill. App. 3d 607, 414 N.E.2d 1188; Donnelley v. Donnelley; Gasperini v. Gasperini; Glassman v. Glassman (1971), 133 Ill. App. 2d 609, 273 N.E.2d 177.

In applying these principles, this court recently held that denial of attorney fees to a spouse claiming inability to pay was not an abuse of discretion in a case where the petitioning spouse had not sustained her burden of showing her spouse’s ability to pay the fees. (In re Marriage of Donahoe (1983), 114 Ill. App. 3d 470, 448 N.E.2d 1030.) Conversely, this court reversed an award of fees where there was a similar failure to demonstrate the financial ability of the payor spouse to comply with the order to pay attorney fees. In re Marriage of De Frates (1980), 91 Ill. App. 3d 607, 414 N.E.2d 1188.

In our view, these precedents are controlling in the case at bar. We need not discuss the question of Wanda’s inability to pay her own attorney-fees because the record does not indicate that Richard is able to pay them. Indeed, as noted above, the record shows that the only major item of marital property, the home, was awarded to Wanda, leaving Richard without assets with which to pay the fees as ordered. Accordingly, we reverse the trial court’s order that Richard pay $4,000 for Wanda’s attorney’s defense of this appeal.

Affirmed in part, reversed in part.

ROMITI, P.J., and JOHNSON, J., concur.


author: JUSTICE PERLIN

text:
      In re MARRIAGE OF DORIS McNEELEY, Petitioner-Appellee, and MARTIN F. McNEELEY, Respondent-Appellant.
    First District (2nd Division)
    No. 82 — 2157
    Opinion filed August 16, 1983.
    Rehearing denied September 27, 1983.

      Beermann, Swerdlove, Woloshin, Barezky & Berkson, of Chicago (Miles N. Beermann and Alvin R. Becker, of counsel), for appellant.
    Engerman, Erlich, Jacobs & Berman, Ltd., of Chicago (Allen C. Engerman, Barry A. Erlich, and Scott L. Davis, of counsel), for appellee.
   JUSTICE PERLIN

delivered the opinion of the court:

Respondent, Martin E McNeeley (Martin), appeals from a judgment dissolving his 32-year marriage to petitioner, Doris McNeeley (Doris). On appeal Martin contends that the trial court abused its discretion in awarding to Doris the majority of marital assets and exclusive possession of the marital home for a period of five years; in awarding to Doris permanent maintenance; and in requiring Martin to pay $16,000 for Doris’ attorney fees. Doris has cross-appealed from that portion of the judgment which requires her to pay $1,856 to her former attorney. For the reasons hereinafter stated, we reverse in part and remand for further proceedings.

Doris filed a petition for dissolution on June 9, 1980, but on May 21, 1981, she was granted leave to withdraw her petition for dissolution and to file a petition for legal separation and temporary maintenance. On May 22, 1981, the trial court ordered Martin to pay Doris $325 per week ($1,407.25 per month) as temporary maintenance and, in addition to pay the $642.54 monthly mortgage payment on the marital home in Deerfield, Illinois. On November 12, 1981, Doris was granted leave to withdraw her petition for separation and to file a petition for dissolution. Trial was held on November 18,1981.

The parties were married on January 20, 1950, and separated on December 31, 1979, when Martin vacated the marital home. Three children were born to the marriage. At the time of trial, all had reached the age of majority. The parties’ youngest child, David, age 20, was employed and living with Doris. There is no evidence that David contributed to household expenses. Doris, age 53, is a high school graduate with an additional three weeks of secretarial training. She stated that she suffers from arthritis in her hands and legs and bursitis in her shoulders but she was not receiving treatment or medication for these conditions. Doris had not been employed during the marriage but stated on cross-examination that prior to the marriage she was employed for IV2 to two years as a traffic manager at a Cleveland radio station. Doris admitted that she has not sought employment since initiating this action. Her only source of income was the temporary maintenance payments she received from Martin. An unsigned affidavit listing Doris’ personal monthly expenses was made a part of this record. In this list of expenses, which totaled $4,050, was a $650 monthly mortgage payment, which at the time of trial was being paid by Martin, and $1,071 as estimated State and Federal income tax based on a projected income of $48,600 per year. Doris stated that many of the expenses listed by her were estimated or were listed in anticipation of the money which she hoped to receive as a result of these proceedings.

Martin, age 55 and in good health, is a high school graduate with one year of college education and at the time of trial was employed as a television and radio announcer and newscaster by WGN Continental Broadcasting Company in Chicago. Martin introduced evidence which established that his projected gross income for 1981 was $96,000 to $97,000 ($5,650 net income per month). This projection included Martin’s base salary and additional fees for special television and radio announcements. Martin filed an affidavit listing monthly expenses totaling $2,442, although he testified that his total monthly personal expenses were about $1,300. When the latter figure is combined with the mortgage and temporary maintenance payments, it appears that Martin’s monthly expenses were approximately $3,349.

A stipulation admitted at trial shows that the parties’ marital assets included the marital home, which on March 13, 1980, was appraised at $160,000 with a $24,000 mortgage; household furniture and furnishings valued at $20,000; Martin’s pension valued at $26,000 (without regard to tax or withdrawal consequences); Doris’ automobile worth $4,000 with no liens, and Martin’s automobile worth $11,000 with a $10,000 lien; and $2,000 worth of stocks.

In addition to the marital assets, the testimony reveals that Doris had approximately $1,000 in cash remaining from her $1,250 share of the 1980 tax refund, and Martin had about $400 in cash in a savings account and $2,000 in cashier’s checks, $1,250 of which was his share of the 1980 tax refund. Martin also owned about $2,500 in apartment furniture and furnishings.

At the conclusion of the testimony, the trial court took the case under advisement without argument. On December 23, 1981, the court rendered its findings but reserved entry of judgment pending a hearing on the issue of attorney fees. The trial court found that all of the assets of the parties were marital and were valued in accordance with the parties’ stipulation. The court found that Doris’ monthly expenses were $4,000 and that, in accordance with Martin’s testimony, his monthly expenses were approximately $3,000. Because of the length of the marriage, the evidence of Martin’s “present income” and the fact that Doris was unemployed, the court awarded to Doris permanent maintenance of $3,200 per month ($739 per week). The trial court further awarded the marital home to Doris for five years or until she remarried, requiring that she pay the mortgage with reimbursement upon sale of all principal reductions made by her on the mortgage. After five years the marital home was to be sold, Doris to receive 65% of the proceeds and Martin to receive 35% of the proceeds. Each party was to share in the cost of any “major repairs” to the marital home in proportion to their respective interests in the sale proceeds. The court ordered that the marital home be placed in a land trust with the parties as tenants in common according to their respective interests.

The trial court also awarded to Doris the furniture and furnishings in the marital home and her automobile. It awarded to Martin his interest in his pension, the stocks and his automobile.

A hearing was held on March 31, and April 9, 1982, on the petition for attorney fees, following which the trial court ordered Martin to pay $16,000 to Doris’ attorneys. Martin was required to pay the attorney fees in two equal installments, the first within 20 days and the second within 120 days of the entry of judgment. In addition, Doris was ordered to pay her former attorney $1,856 in four equal installments within 120 days of the entry of judgment.

A judgment for dissolution, incorporating the trial court’s findings and the award of attorney fees, was entered on July 21, 1982, from which both parties now appeal.

I

Martin first challenges the property distribution made by the trial court and contends that the court abused its discretion in awarding to Doris the majority of the marital assets and exclusive possession of the marital home for a period of five years. Martin argues that this apportionment was arbitrary and failed to consider the relevant factors set forth in section 503(c) of the Illinois Marriage and Dissolution of Marriage Act (Ill. Rev. Stat. 1979, ch. 40, par. 503(c)).

It is well established that the touchstone of a proper apportionment is whether it is equitable in nature. (In re Marriage of Lee (1979), 78 Ill. App. 3d 1123, 1132, 398 N.E.2d 126.) When apportioning marital property, the trial court must consider all relevant factors under section 503(c) which, in this case, include:

“(1) the contribution or dissipation of each party in the acquisition, preservation or depreciation or appreciation in value, of the marital and non-marital property, including the contribution of a spouse as a homemaker or to the family unit;
* * *
(3) the duration of the marriage;
(4) the relevant economic circumstances of each spouse when the division of the property is to become effective ***;
* * *
(7) the age, health, station, occupation, amount and sources of income, vocational skills, employability, estate, liabilities, and needs of each of the parties;
* * *
(9) whether the apportionment is in lieu of or in addition to the maintenance; and
(10) the reasonable opportunity of each spouse for future acquisition of capital assets and income.” Ill. Rev. Stat. 1979, ch. 40, par. 503(c).

It is also well established that the trial court has broad discretion under the Act to apportion marital property in “just proportions” (In re Marriage of Bentivenga (1982), 109 Ill. App. 3d 967, 971, 441 N.E.2d 336), and a court of review will not disturb that apportionment unless it can be clearly shown that the trial court abused its discretion. (In re Marriage of Rothbardt (1981), 99 Ill. App. 3d 561, 564, 425 N.E.2d 1146.) It has been held that an abuse of discretion is established if “no reasonable man would take the view adopted by the trial court.” In re Marriage of Lee (1979), 78 Ill. App. 3d 1123, 1127, 398 N.E.2d 126.

Here, the trial court divided the marital assets, totaling $189,000, by allocating to Doris total assets valued at $112,400 (approximately 59.8% of total) and to Martin, total assets valued at $76,600 (approximately 40.5% of total). It appears that when apportioning the marital assets^ the trial court considered the length of the marriage, Doris’ age and education, her employment background and absence from the labor market for more than 32 years, all of which strongly suggest that she would be unable to maintain the standard of living she enjoyed while she was married. On the other hand, the court found that Martin is a professional, earning a substantial income with a greater opportunity to acquire capital assets and additional income. Although Martin’s challenge to the property distribution relies heavily on the fact that he was solely responsible for the financial contribution necessary to acquire and preserve the marital assets, it must be noted that this is but one factor to be considered by the trial court when determining property distribution, and a party’s monetary contribution should not be overemphasized. (In re Marriage of Aschwanden (1980), 82 Ill. 2d 31, 38, 411 N.E.2d 238.) Here, it appears that the trial court weighed the relevant statutory factors and, in light of the parties’ relative economic circumstances, we cannot conclude that it was unreasonable for the court to award to Doris a greater portion of the marital assets.

Martin maintains, however, that the combination of awarding to Doris a majority of the marital assets plus exclusive possession of the marital home for five years, with credit for all reductions in principal of the mortgage, was an abuse of discretion. Martin argues that there is no authority to award a spouse exclusive possession of the marital residence when there are no minor children.

Courts, however, have found such awards to be reasonable when considering the totality of the economic circumstances of the parties. (In re Marriage of Lukas (1980), 83 Ill. App. 3d 606, 618, 404 N.E.2d 545.) In light of the economic circumstances of the parties here, and because their youngest child was living with Doris, we conclude that it was not unreasonable to grant her exclusive possession of the marital home for a limited time. In addition, it was not unreasonable for the court to provide for reimbursement to Doris of all reductions in principal of the mortgage. As the mortgage payment, which includes principal, interest, costs and taxes, is made by Doris each month, the value of the marital home will be preserved and increased. It is, therefore, reasonable for Doris to recoup the costs of preserving Martin’s interest in that marital asset.

II

Martin next contends that the awarding of permanent maintenance to Doris was an abuse of the trial court’s discretion.

Generally, the awarding of maintenance, like the distribution of marital property, is a matter within the sound discretion of the trial court and will not be disturbed on appeal unless it amounts to an abuse of that discretion or is contrary to the manifest weight of the evidence. (In re Marriage of Johnson (1982), 106 Ill. App. 3d 502, 507, 436 N.E.2d 228.) An award of maintenance is warranted where the court finds that the party seeking maintenance lacks sufficient property, including marital property apportioned to her, to provide for her reasonable needs and is unable to support herself through appropriate employment or is otherwise without sufficient income. (Ill. Rev. Stat. 1979, ch. 40, par. 504(a).) Section 504(b) of the Act (Ill. Rev. Stat. 1979, ch. 40, par. 504(b)) provides that the maintenance order shall be in such amounts and for such periods of time as the court deems just after consideration of all factors including:

“(1) the financial resources of the party seeking maintenance, including marital property apportioned to him, and his ability to meet his needs independently, including the extent to which a provision for support.of a child living with the party includes a sum for that party as custodian;
(2) the time necessary to acquire sufficient education or training to enable the party seeking maintenance to find appropriate employment;
(3) the standard of living established during the marriage;
(4) the duration of the marriage;
(5) the age and physical and emotional condition of both parties; and
(6) the ability of the spouse from whom maintenance is sought to meet his needs while meeting those of the spouse seeking maintenance.”

Here, the trial court awarded to Doris, $3,200 per month as maintenance until here death or remarriage. Martin argues that the amount of the maintenance award allows Doris to live in a manner beyond that which she enjoyed during the marriage. Our review of the record supports Martin’s argument and fails to reveal evidence which would support the trial court’s increase in the maintenance award from $1,407 per month as temporary maintenance to $3,200 per month as “permanent”- maintenance. It appears that the trial court may have based this increase in maintenance on Doris’ unsigned affidavit, listing her total monthly expenses as $4,050. However, there does not appear to be any evidence which would support this figure, especially when Doris’ testimony established that many of the expenses listed were not actually incurred each month but she felt “it would be nice” to be able to afford them.

Additionally, when making the maintenance award, which amounts to nearly 40% of Martin’s gross income, the trial court explained that it was “based upon the fact that [Doris] is unemployed” and because the court “saw no opportunity for employment for her in the foreseeable future.” The court reasoned that, because of her age and her sparse employment record, Doris was “practically unemployable.”

Our review of the record, however, does not support this finding. Although Doris has been away from the labor force for a substantial period of time, she is only 53 years old and it appears from the record that she has made no attempt to find suitable employment. The Act creates an affirmative obligation on the part of the spouse seeking maintenance to seek appropriate employment. (In re Marriage of Rothbardt (1981), 99 Ill. App. 3d 561, 568, 425 N.E.2d 1146.) We recognize that Doris’ educational and employment backgrounds are limited but these limitations alone are insufficient to support a conclusion that she is “unemployable.”

Although the trial court noted that if Doris becomes employed Martin could pursue any relevant remedies for modification of the maintenance award available to him under the Act, we believe that it would have been more appropriate for the trial court to reserve for review the maintenance award after a certain time period, giving Doris an opportunity to seek appropriate employment. (In re Marriage of Asch (1981), 100 Ill. App. 3d 293, 298, 426 N.E.2d 1066.) If at the end of such time period Doris has reasonably sought employment and failed to find anything suitable, the maintenance award could continue. If, however, Doris has not made any attempt to seek employment and begin to support herself, the maintenance payments could be reduced or terminated.

Based upon the foregoing, we conclude that the award of maintenance was in this instance an abuse of the trial court’s discretion and contrary to the manifest weight of the evidence.

Ill

Martin next contends that the order of the trial court directing him to pay $16,000 as Doris’ attorney fees was unreasonable and an abuse of discretion. Martin argues that the property distribution and maintenance award puts Doris in as good or better financial position than he to pay her attorney fees. He further contends that in a case such as this which he terms as not complex or unusual, where the trial took one afternoon and where there was no dispute over the value or nature of the parties’ assets, an award of $16,000 in attorney fees was excessive. We are compelled to agree.

While the allowance of attorney fees in dissolution proceedings rests within the sound discretion of the trial court and the exercise thereof will not be interfered with unless such discretion is clearly abused, a court of review will not hesitate to reduce an unreasonably high award. (In re Marriage of Brophy (1981), 96 Ill. App. 3d 1108, 1117, 421 N.E.2d 1308.) Fees granted should provide for fair compensation for reasonable and necessary services determined by considering the financial position of the parties, the skill and standing of the attorneys employed, the importance, novelty and difficulty of the questions raised, the degree of responsibility, the time and labor required, the usual and customary charge in the community, and the benefits resulting to the client. (Donnelley v. Donnelley (1980), 80 Ill. App. 3d 597, 602, 400 N.E.2d 56.) A consideration of the financial ability to pay the fees may limit the amount to be awarded, notwithstanding the fact that an extensive expenditure of time and labor was required by the representation. In re Marriage of Brophy (1981), 96 Ill. App. 3d 1108, 1118.

We have noted our review of the financial positions of the parties in our discussion of other aspects of this case and we believe that the record supports the conclusion that Martin is in a superior position to acquire income and additional capital assets which would enable him to contribute to the payment of Doris’ attorney fees. However, we believe the amount of attorney fees awarded in the instant case must be reconsidered.

It is well established that a mere compilation of hours and hourly rates such as was provided in this case will not necessarily justify the award of attorney fees as requested. (In re Marriage of Brophy (1981), 96 Ill. App. 3d 1108, 1118; see also, In re Marriage of Rizzo (1981), 95 Ill. App. 3d 636, 651, 420 N.E.2d 55.) Doris’ attorneys assert that they expended a substantial period of time “to discover possible hidden assets.” However, the evidence in this record shows that all property involved was marital, and the parties stipulated that Martin’s income was all salary with the exception of $2,000 worth of stocks. Many contested pretrial motions were presented but they do not appear to have presented issues which were novel or relatively complex from a family law viewpoint. See In re Marriage of Dulyn (1980), 89 Ill. App. 3d 304, 314, 411 N.E.2d 988.

The reasoning underlying the trial court’s award of $16,000 in attorney fees is not apparent from the record, and we cannot conclude that such an award is supported by the evidence.

IV

Finally, Doris cross-appeals that portion of the judgment which requires that she pay $1,856 to her former' attorney. It is Doris’ contention that since the trial court concluded that Martin was in a superior financial position and was therefore capable of paying her present attorney fees, the court should have reached the same conclusion with regard to the request for fees from her former attorney. In his reply brief filed with this court, Martin questioned the propriety of an award to Doris’ former attorney for services which were apparently rendered prior to the commencement of this action and, therefore, not within the purview of section 508 of the Act. Ill. Rev. Stat. 1979, ch. 40, par. 508.

Because we have determined that the permanent maintenance award and award of attorney fees to Doris’ present attorneys must be reversed, we believe that the issue regarding the effect of section 508 on the request for fees by Doris’ former attorney would best be addressed by the trial court upon remand.

For the reasons heretofore stated, we reverse the trial court’s award of permanent maintenance and its award of attorneys fees, and remand the cause for further proceedings not inconsistent with this opinion. In order to assure a distribution in “just proportions” as mandated by the statute, we believe the trial court should review all interrelated property and maintenance awards, including the award of attorney fees.

Reversed in part and remanded for further proceedings.

STAMOS and HARTMAN, JJ., concur.

      It is not apparent from the record how the amount of $48,000 was determined. Martin speculates in his brief that this amount is based upon Doris’ anticipated maintenance award.

      We note a reference in Martin’s brief to a partition action allegedly filed by him in Lake County Circuit Court. A party’s right to partition of jointly held marital property, however, is subject to a court’s disposition of marital property in accordance with section 503 of the Act. In re Marriage of Kush (1982), 106 Ill. App. 3d 233, 236, 435 N.E.2d 921.


author: JUSTICE LORENZ

text:
    HARRY REISMAN et al., Plaintiffs-Appellees, v. BERTALDO DELGADO, Defendant—(Coronet Insurance Company, Defendant and Garnishee-Appellant).
    First District (5th Division)
    No. 82 — 2802
    Opinion filed August 26, 1983.

      Fisch, Lansky & Greenburg, of Chicago (Morris A. Haft, of counsel), for appellant.
    Larry Karchmar, of Chicago, for appellees.
   JUSTICE LORENZ

delivered the opinion of the court:

Coronet Insurance Co. appeals from a post-judgment ruling which ordered it, as garnishee, to pay $10,000 to Harry and Rita Reisman, the judgment creditor’s of Coronet insured (Bertaldo Delgado). (See Ill. Rev. Stat. 1981, ch. 110, par. 12 — 701 et seq.) According to Coronet the trial court committed reversible error when it held that (1) the insurer could not assert policy defenses which it could have raised against its insured; (2) the insured did not breach his policy’s notice-of-suit provision; and (3) the insurer was not prejudiced, even though it did not receive notice of plaintiffs’ action until after the default judgment entered in that case had become final.

We find the trial court erred, and we reverse. Pertinent to our decision are the following facts:

Plaintiffs Harry and Rita Reisman filed an action against Bertaldo Delgado alleging that on May 28, 1976, they suffered damages of $10,000 as a result of an automobile accident caused by Delgado’s negligence. Summons was served on Delgado, and Coronet, his insurer, hired counsel to defend him after it received notice of this action. However, the action was dismissed for want of prosecution, and the dismissal order became final after 30 days.

Plaintiffs then filed a second action based on the same accident (see Ill. Rev. Stat. 1981, ch. 110, par. 13 — 217), but they were unable to find Delgado. Alleging that he had become a nonresident of Illinois, plaintiffs acted to obtain in personam jurisdiction over Delgado by serving summons on the Secretary of State. (See Ill. Rev. Stat. 1981, ch. 95%, par. 10 — 301.) Delgado failed to answer or appear, and the plaintiffs obtained a $10,000 default judgment on May 21, 1981.

Coronet first received notice of the second cause of action on August 20, 1981 — more than 30 days after entry of the default judgment — when the plaintiffs commenced proceedings to garnish the proceeds of Delgado’s liability insurance policy.

In the garnishment proceedings, Coronet asserted it was not liable to the plaintiffs on the grounds that Delgado breached his policy’s notice-of-suit provision, and that notice of the lawsuit was not received until after the default judgment became final. (See Ill. Rev. Stat. 1981, ch. 110, par. 2 — 1301(e).) An evidentiary hearing was held in the garnishment action, and a Coronet officer testified that (a) the insurer did not receive notice of the second lawsuit until August 20, 1981, and (b) that Delgado’s policy contained a provision which required the insured “to notify the company of any summonses, subpoenas, or notices regarding any lawsuits as soon as possible.” (The insurance policy was not introduced into evidence at this hearing, but the plaintiffs did not object to secondary evidence of the contents of this document, and they do not claim that this testimony was inaccurate.)

The trial court held that the insured’s breach of the notice-of-suit provision was not a valid defense to plaintiffs’ garnishment action and that, in any event, Coronet was not prejudiced by this lack of notice because it received notice of the default judgment in time to seek post-judgment relief under section 2 — 1401 of the Code of Civil Procedure. (Ill. Rev. Stat. 1981, ch. 110, par. 2 — 1401.) The court accordingly ordered Coronet to pay $10,000 to the plaintiffs.

Opinion

We initially consider whether the trial court erred when it held that Coronet could not assert against the plaintiffs a defense it could have asserted against its insured.

“ ‘The general rule in garnishment is that a claim asserted by a judgment creditor against a garnishee must be one which the judgment debtor himself could have maintained.’ (Hunter Manufacturing, Inc. v. Hines (1979), 76 Ill. App. 3d 664, 395 N.E.2d 186.) Therefore, where an insured has breached policy conditions, a garnishment action generally will not lie.” (Johnson v. R & D Enterprises (1982), 106 Ill. App. 3d 496, 500.) Specifically, when the judgment creditor of an insured seeks to garnish the proceeds of an insurance policy, the insurer can assert any defenses which it could have raised against the insured, “absent some provision of the law which bars the insurer from raising those defenses.” Johnson v. R & D Enterprises (1982), 106 Ill. App. 3d 496, 498.

Consequently, “where the policy is of a statutory type, that is, one required as a condition precedent to the operation of the particular vehicle upon the highway, the breach of a condition such as notice is generally held immaterial so far as the rights of third persons are concerned.” 8 Appleman, Insurance Law & Practice sec. 4732, at 19-20 (1981). See, e.g., Johnson v. R & D Enterprises (1982), 106 Ill. App. 3d 496 (decided under a statute which prohibits trucking companies from operating motor vehicles unless they either obtain a specified amount of liability insurance or provide proof of financial responsibility).

The plaintiffs do not claim that Delgado was statutorily required to obtain insurance as a condition precedent to operating a motor vehicle in Illinois. Instead, they argue that it would “foster” the policy behind the Illinois Safety Responsibility Law (Ill. Rev. Stat. 1981, ch. 95½, par. 7 — 100 et seq.) to prohibit insurers from asserting policy defenses against the insured’s judgment creditors.

In this regard it appears that “[a] policy issued to comply with a financial responsibility act would relieve the injured persons of the hazard of being confronted with policy defenses by the insurer, if the insured were a person required to comply with that statute, although a different result would follow where the insured was not in that category.” 8 Appleman, Insurance Law & Practice sec. 4818, at 413-14 (1981).

In the present case, however, the plaintiffs do not claim that the insured was within the category of drivers who are required, under the Illinois Safety Responsibility Law, to either prove their financial responsibility or obtain an insurance policy which meets statutory requirements. (See Ill. Rev. Stat. 1981, ch. 95½, par. 7 — 301 et seq.) We, therefore, hold that the Safety Responsibility Law does not prevent Delgado’s insurer from relying on breach-of-policy defenses in a garnishment action. Cf. Johnson v. R & D Enterprises (1982), 106 Ill. App. 3d 496.

Next, the plaintiffs argue that Delgado did not breach the notice-of-suit provision because summons was served on the Secretary of State, and Delgado allegedly never had actual notice of the second suit.

When a defendant who is or becomes a nonresident of Illinois causes injury or damage as the result of operating a motor vehicle on Illinois highways, section 10 — 301 of the Illinois Vehicle Code provides that it shall be assumed the defendant has agreed to appoint the Secretary of State “to be his true and lawful attorney” for service of process in actions arising out of such occurrences, and that such service “shall be of the same legal force and validity as though served upon him personally.” Ill. Rev. Stat. 1981, ch. 95½, par. 10 — 301.

The validity of plaintiffs’ default judgment against Delgado depends upon operation of section 10 — 301, and they cannot now deny that their service of summons on Delgado’s “true and lawful attorney” had the “same legal force and validity as though served upon him personally.” The legal effect of personal service is that the defendant so served is held to have knowledge of the lawsuit, and the plaintiffs (having obtained benefit of section 10 — 301) cannot deny that Delgado knew of their second lawsuit. Giving service of process under section 10 — 301 “the same legal force and validity” as personal service, we hold that the plaintiffs are estopped from denying that Delgado knew of the second lawsuit and breached the notiee-of-suit provision of his insurance policy.

Finally, we consider the effect of the failure to give Coronet notice of plaintiffs’ second action until after the default judgment had become final.

“[I]n the absence of statutes or required form policies, most courts hold that an insured’s breach of his obligation to give timely notice of an accident, claim or suit operates to prevent a recovery by the injured person.” (8 Appleman, Insurance Law & Practice sec. 4816 at 383 (1981).) However, “It has been held elsewhere that in an action affecting the rights of innocent third parties under an automobile liability insurance policy, noncompliance by the insured with policy provisions as to notice and forwarding suit papers will not bar recovery, unless the insurer shows that the failure to give such notice has resulted in substantial prejudice to its rights.” 8 Appleman, Insurance Law & Practice sec. 4816, at 388 (1981).

We need not decide which rule is applicable in Illinois, because the manifest weight of the evidence establishes that Coronet suffered substantial prejudice. Where, as in the present case, “the insure[d] failed to forward suit papers, prejudice to the insurer is clearly established by the fact that a default judgment was taken against its insure[d].” (Hargrove v. CNA Insurance Group (1974), 228 Pa. Super. 336, 340, 323 A.2d 785, 787.) An insurer is prejudiced when it does not receive notice of a lawsuit until after entry of a default judgment because, in such cases, it “did not have an opportunity to appear and defend the action on liability, was not given an opportunity to cross-examine plaintiffs’ witnesses on damages and was not given an opportunity to present its own evidence relative to liability and damages.” Flagg v. Puleio (1959), 189 Pa. Super. 329, 334, 150 A.2d 400, 402.

The plaintiffs nevertheless argue Coronet was not prejudiced because it obtained notice of their action within time to seek post-judgment relief under section 2 — 1401 of the Code of Civil Procedure. (Ill. Rev. Stat. 1981, ch. 110, par. 2 — 1401.) However, the judgment entered against Delgado appears to be valid, and the plaintiffs fail to show there is good cause for granting relief from this judgment under section 2 — 1401.

We hold the manifest weight of the evidence establishes that Coronet suffered substantial prejudice from breach of the notice-of-suit provision.

Based on all the reasons given above, the judgment ordering Coronet to pay $10,000 to the plaintiffs is reversed.

Reversed.

SULLJVAN and MEJDA, JJ., concur.