author: Miss JUSTICE McGILLICUDDY

text:
    THE PEOPLE OF THE STATE OF ILLINOIS, Plaintiff-Appellee, v. MICHAEL MARTIN, Defendant-Appellant.
    First District (3rd Division)
    No. 79-1168
    Opinion filed October 28, 1981.

      Ralph Ruebner and Gordon Berry, both of State Appellate Defender’s Office, of Chicago, for appellant.
    Bernard Carey, State’s Attorney, of Chicago (Marcia B. Orr and Mary Ellen Dienes, Assistant State’s Attorneys, of counsel), for the People.
   Miss JUSTICE McGILLICUDDY

delivered the opinion of the court:

A jury in the circuit court of Cook County found the defendant, Michael Martin, guilty of involuntary manslaughter in connection with the death of George Obee, the owner of a funeral home in Chicago. He was sentenced to an extended term of 10 years, and he appeals.

On appeal the defendant contends that the trial court erred (1) in denying his motion to quash his arrest; (2) in barring certain testimony of a defense witness; (3) in allowing the State to cross-examine a defense witness about a prior conviction; (4) in allowing the State- to introduce extensive evidence concerning the homicide investigation; and (5) in imposing an extended term sentence.

Prior to trial a hearing was conducted on defendant’s motion to quash his arrest and suppress certain evidence. At the hearing Sylvester Martin, the defendant’s father, testified that on August 1,1977, he was sitting in his car in front of his residence. The defendant approached him and stated that he wanted the car. When he refused to give the car to the defendant, an argument ensued. The defendant struck Sylvester, and Sylvester struck the defendant. Subsequently, the police arrived and arrested the defendant. Sylvester neither asked the police to press charges nor signed a complaint.

The defendant testified that he was arrested for disorderly conduct. Two police officers took him to a police station where he remained overnight. The following morning the defendant was taken to a holding room to appear before the judge. Before he appeared in court, the defendant was taken downstairs and interrogated concerning another matter.

Counsel asked the defendant whether at the time of his arrest he had any money on his person to make bond. The State’s objection to this question was sustained.

Officer Artis Jenkins of the Chicago Police Department testified that on August 1, 1977, at approximately 5:15 p.m., he and his partner observed a fight involving the defendant and his father in the vicinity of 4700 S. Wabash Avenue. A group of people had gathered on the corner. Jenkins saw the defendant throwing punches at his father. The officers intervened and separated the two men. Sylvester Martin signed a disorderly conduct complaint against his son; however, Jenkins did not know where the complaint was at the time of the hearing. An unidentified man on the street corner told Jenkins that the defendant “was wanted on something big that happened on Indiana near 51st Street.” Obee’s funeral home was located at 5039 S. Indiana.

Jenkins and his partner took the defendant to the police station, and Jenkins contacted homicide investigators. Jenkins testified that the court call on the charge against the defendant was set for 9:30 a.m. the following morning.

After hearing the evidence, the trial court held that the arrest was legal, that the detention and interrogation were permissible, and that the evidence seized was admissible. Accordingly, the court denied the defendant’s motion.

At trial, Richard Alexander, a part-time police officer for the Village of Moline in Will County, Illinois, testified that on July 24,1977, he and his partner met with a local resident at the intersection of the ManhattanMonee Road and Interstate Route 57. The resident directed the officers to the body of an elderly man located in a ditch alongside the road. A wallet in a suit coat found near the victim contained cards and papers belonging to Obee.

Sergeant John Watters of the Will County sheriff’s police was assigned to the homicide investigation. On July 24, 1977, he and Investigator Robert Pedersen went to the area where Obee’s body was lying. Watters noticed severe abrasions on the forehead and face of the victim.

Later that afternoon Watters interviewed Lawrence Travis and Mandell Durell, a nephew of the decedent, at the Joliet police station. Watters obtained from Travis keys to a limousine which was parked in the police parking lot. He noticed a red fluid substance on the taillight assembly and inside the trunk of the vehicle.

Subsequently, Watters spoke to Investigator Laverty of the Chicago Police Department. Then, he placed Travis under arrest. Watters and Pedersen escorted Travis to Chicago that evening. Watters conducted several interviews and again spoke to Travis at 4:30 a.m.

On August 1, 1977, at approximately 6:30 p.m., Watters received a phone call from Laverty. The following morning he and Pedersen went to Chicago and spoke to Laverty. They subsequently went to a branch court lockup and interviewed the defendant. After the defendant was advised of his constitutional rights, he made the following oral statement.

On July 20, 1977, the defendant met Travis at the home of Ike Lee. Travis told the defendant that he had worked for Obee since he was 14 years of age, that Obee considered him “like a son,” that Obee was extremely wealthy, and that Travis was dissatisfied with the manner in which Obee had been treating him. Travis told the defendant that he would inherit all of Obee’s money. Travis further stated that he once paid a man $20,000 to kill Obee, but the murder did not occur.

Oii July 22, Travis, Ike Lee and the defendant met in Travis’ room in the lower level of the funeral home and discussed killing Obee. Travis offered Lee a Cadillac and $2,000 to murder Obee; however, Lee would not do it alone. Travis offered the defendant $5,000 to assist Lee. The defendant stated that he would have to receive $10,000 in cash.

The following morning Travis called the defendant and informed him that he had the necessary money. Subsequently, Lee brought a .45-caliber handgun to the defendant’s home. Lee and the defendant met Travis at the funeral home and went to Travis’ room. Travis was sitting in a chair, Lee was sitting on the bed, and the defendant was standing in the middle of the room with the gun in his hand. Obee appeared at the door, and the defendant turned and fired a shot which struck Obee in the abdomen. The defendant insisted that the gun went off accidentally. At this point, Travis grabbed the gun from the defendant and fired several shots into Obee’s body.

The following morning Travis gave the defendant three checks payable to Obee and a television set. The defendant burned the checks and sold the television set.

Investigator Robert Pedersen, a deputy sheriff of Will County, also testified concerning the investigation of the homicide and the defendant’s confession. At one point he mentioned that on July 25, 1977, he and Watters went to 33 E. 47th Street in Chicago (the defendant’s address).

Frank Lee testified that on July 23, 1977, Lawrence Travis arrived at Lee’s home in Chicago. Subsequently, Lee and Travis left the building and entered a limousine. While Travis was driving, Lee fell asleep. When Lee awoke, Travis had stopped the vehicle somewhere in the country. Travis got out of the car, opened the trunk, and threw out a body.

Dr. Edward Shalgos, formerly a pathologist with the Cook County Coroner’s office, performed an autopsy on Obee. Dr. Shalgos described heavy abrasions which were present on Obee’s head and face. Dr. Shalgos testified that the trauma which caused these abrasions was applied prior to Obee’s death.

Dr. Shalgos further testified that his examination revealed 14 bullet penetrations. The bullet which caused Obee’s death entered his body through the back and slashed the aorta, causing major internal bleeding.

Ike Lee testified on behalf of the defendant. Lee stated that on July 23,1977, he and the defendant went to see Travis at the funeral home. Lee intended to purchase an automobile from Travis. Lee, Travis, and the defendant had a conversation. The trial court sustained the State’s hearsay objection concerning the content of the conversation.

Lee further testified that Travis and an old man went into the basement, while Lee and the defendant remained upstairs. Lee heard a shot, and he and the defendant left the funeral home. Neither he nor the defendant had a gun.

The State asked Lee whether he had been indicted for armed robbery. In a sidebar conference, the State advised the court that it had a certified copy of Lee’s conviction. Lee denied that he had been convicted of armed robbery; however, the defendant’s counsel subsequently stipulated to the existence of the prior conviction.

I

The defendant first argues that the trial court should have granted his motion to quash his arrest and suppress his statement and certain other evidence because the State did not present any evidence to establish a valid arrest.

In order to establish probable cause for an arrest without a warrant, the arresting officer must possess sufficient knowledge to justify a person of reasonable caution to believe that an offense has been committed by the person being arrested. The trial court’s finding on this issue will not be disturbed unless it is manifestly erroneous. People v. Borges (1980), 88 Ill. App. 3d 912, 410 N.E.2d 1076.

In the instant case Officer Jenkins testified that he saw the defendant strike his father. He further stated that several people had gathered on the corner. We believe that this evidence supports the trial court’s finding that the police had probable cause to arrest the defendant for disorderly conduct. Ill. Rev. Stat. 1977, ch. 38, par. 26 — 1.

The defendant also asserts that his detention was improper because the police failed to inform him of his right to post bail. This argument was recently rejected in People v. Seymour (1981), 84 Ill. 2d 24, 416 N.E.2d 1070 in which our supreme court held that the police do not have to orally advise a defendant of this right.

It is therefore unnecessary for us to address the defendant’s argument that the trial court improperly excluded evidence concerning his ability to post bond.

In addition, the defendant points out that the police escorted him from the courtroom facilities to an interrogation room and questioned him concerning the Obee murder 45 minutes before he was to appear in court on the disorderly conduct charge. Such conduct, according to the defendant, was tantamount to a separate arrest for murder without probable cause.

The defendant cites People v. Quarles (1980), 88 Ill. App. 3d 340, 410 N.E.2d 497, in which this court held that an unlawful arrest tainted the defendant’s confession. In Quarles, the defendant was arrested for the attempted burglary of an apartment. After interrogating the defendant, the arresting officer realized that there was no substance to the charge. Instead of releasing the defendant, the officer questioned the defendant concerning the burglary of a restaurant. Subsequently, the defendant confessed that he had participated in that burglary. The reviewing court held that this retention in custody was an arrest without a warrant and without probable cause.

The court’s finding in Quarles, that the interrogation concerning the restaurant burglary was a separate arrest, was based on the fact that the officer had no probable cause to detain the defendant once he realized there was no substance to the attempted burglary charge. Such was not the circumstances in the instant case. As we have previously discussed, the defendant was lawfully arrested the evening of August 1, 1977. He was lawfully detained pending his court appearance the following morning. Thus, the interrogation of the defendant while he was lawfully detained did not constitute a separate arrest.

II

The defendant also contends that the trial court erred in barring Ike Lee’s testimony concerning the conversation and statements of Travis in the funeral home prior to the shooting. The defendant speculates that this testimony would somehow establish that he did not conspire with Travis to murder Obee. The defendant, however, made no offer of proof at trial as to the substance of this testimony.

The purpose of an offer of proof is to indicate to the trial court, opposing counsel, and a court of review the nature and substance of the evidence expected to be offered. (People v. Rosa (1977), 49 Ill. App. 3d 608, 364 N.E.2d 389.) Here, the defendant did not make an offer of proof, and there is nothing in the record to indicate the substance of the testimony the defendant was attempting to introduce. Thus, we cannot consider this issue on review.

Ill

The defendant next argues that the State improperly questioned Ike Lee about his prior armed robbery conviction. The defendant cites People v. Madison (1974), 56 Ill. 2d 476, 309 N.E.2d 11, in which our supreme court held that impeachment of the defendant should be by means of the record of conviction or by an authenticated copy. The court explained that this rule is founded upon the possibility that a defendant might be prejudiced during a jury trial if he is forced to testify concerning prior convictions.

We first note that Madison concerned the impeachment of a defendant while the instant case involves the impeachment of a defense witness. Assuming that the Madison holding applies also to witnesses, we find no reversible error. As the court also stated in Madison, reversal is not required unless the presentation of the prior conviction by means of cross-examination deprived the defendant of substantial justice or influenced the determination of his guilt. In view of the defendant’s confession in the instant case, the error, if any, was harmless.

IV

The defendant next contends that the trial court erred in allowing Sergeant Watters and Investigator Pedersen to testify in great detail concerning the homicide investigation. The defendant argues that this testimony invited the jury to speculate on the results of the investigation. The State responds that this testimony concerning investigatory procedures was proper to explain the manner in which the police apprehended the defendant.

The defendant’s failure to raise this issue in his written motion for a new trial constitutes a waiver of the issue. (People v. Pickett (1973), 54 Ill. 2d 280, 296 N.E.2d 856.) Assuming there was no waiver, we believe that this testimony was competent evidence. This court has consistently held that although testimony concerning the contents of an officer’s conversation with a witness is hearsay, the officer can testify to the existence of his conversation and his subsequent actions thereon. (People v. Dunning (1980), 88 Ill. App. 3d 706, 410 N.E.2d 1052; People v. Daliege (1976), 40 Ill. App. 3d 706, 352 N.E.2d 247; People v. Coleman (1974), 17 Ill. App. 3d 421, 308 N.E.2d 364.) Both officers in the instant case testified only to the existence of the conversations and not to the contents thereof.

V

Finally, the defendant contends that the trial court erred in imposing an extended term sentence. An extended term of imprisonment is authorized by statute if one of two aggravating factors are present. (Ill. Rev. Stat., 1977 Supp., ch. 38, par. 1005 — 8—2.) The first factor is a prior conviction in Illinois of the same or greater class felony within the past 10 years. The second factor is a finding that the offense was accompanied by exceptionally brutal or heinous behavior indicative of wanton cruelty. Ill. Rev. Stat., 1977 Supp., ch. 38, par. 1005 — 5—3.2(b).

In the instant case the defendant was found guilty of involuntary manslaughter, a Class 3 felony. (Ill. Rev. Stat. 1977, ch. 38, par. 9 — 3(b)(1).) The record reveals that in 1974 the defendant was convicted of robbery, a Class 2 felony. (Ill. Rev. Stat. 1977, ch. 38, par. 18 — 1(b).) Thus, pursuant to the terms of the Criminal Code, the trial court was authorized to sentence the defendant to an extended term.

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

Affirmed.

McNAMARA and WHITE, JJ., concur.


source: Caselaw Access Project

author: Mr. JUSTICE LINN

license: Public Domain

text:
    GEORGE WILLIAM HOFFMAN & CO., Professional Corporation, Plaintiff-Appellee, v. CAPITAL SERVICES CO. et al., Defendants-Appellants.
    First District (4th Division)
    No. 80-3033
    Opinion filed October 29, 1981.
    — Rehearing denied November 25, 1981.
    James M. DeZelar and Robert Handelsman, both of Robbins, Coe, Rubinstein & Shafran, Ltd., of Chicago, for appellants.

      Donald L. Metzger, of Chicago (Metzger & Associates, Ltd., of counsel), for appellee.
   Mr. JUSTICE LINN

delivered the opinion of the court:

Defendants, Capital Services Co. and Leland Swinehart, appeal from a default judgment entered against them in the circuit court of Cook County. The default judgment was entered on two counts of plaintiff’s complaint because of defendants’ alleged refusal to comply with the rules of discovery and orders of the court compelling discovery. The judgment as to one count granted plaintiff’s request for rescission of a contract and ordered defendants to return to plaintiff $19,000 paid to them under the contract plus $7,500 in expenses incurred by plaintiff in its attempt to carry out the contract. The judgment as to the other count awarded plaintiff $100,000 in compensatory damages allegedly caused by defendants’ fraudulent misrepresentation and $250,000 in punitive damages. The trial court also ordered defendants to pay plaintiff $3,443 in attorney’s fees incurred by plaintiff as a result of defendants’ refusal to comply with discovery.

On appeal, defendants contend: (1) the entry of a default judgment as a sanction for their failure to comply with the rules of discovery and orders of the court compelling discovery, and the denial of their motion to vacate the default judgment, were improper orders; (2) assuming the default judgment was a proper sanction, the entry of judgment against defendant Swinehart on the rescission and restitution count of plaintiff’s complaint was improper as a matter of law because he was not a party to the contract and could not be held personally liable for the acts of defendant Capital Services Co.; and (3) assuming the default judgment was a proper sanction, the entry of judgment against defendants on the fraudulent misrepresentation count was improper because plaintiff failed to state a cause of action for fraud and failed to present any evidence of fraud during a hearing held before the trial court in which the plaintiff presented proof of the allegations of its complaint.

We affirm in part and reverse in part.

Background

Plaintiff, George William Hoffman & Co., is an accounting firm owned and managed by George Hoffman, a certified public accountant. Defendant, Capital Services Co., is a presently inactive accounting firm whose sole shareholder, president, and only professional employee is defendant Swinehart.

On June 9, 1978, plaintiff and Capital Services Co. (and allegedly Swinehart) entered into a contract for the sale of the accounting practice of Capital Services to plaintiff for a price no less than $45,000 (the actual amount was to be determined by a percentage of the annual billings of the practice for the first three years following the sale). Under the contract, plaintiff was to make a $15,000 down payment with payments of $1,000 per month thereafter.

The contract was a peculiar work of draftsmanship. Though the named seller was Capital Services Co., and though Swinehart signed the contract “Leland Swinehart President,” throughout the contract the seller was referred to in the third person masculine — he, him, his, and himself— and it appears likely that at least some of the promises made by the “seller” were intended to be personal promises of Swinehart. For example, the seller, after the sale, was required to “make himself available, via telephone, 9 9 9 as a consultant” to the plaintiff. This term of the contract would appear to have meant that Swinehart was to be available as a consultant and not the corporate entity, which entity, for all intents and purposes, was to be out of business after the sale. Also, one term in the contract required the seller not to compete professionally with plaintiff for five years after the sale. Promises not to compete in the area of professional services are usually made by individuals who are the professionals and not by the corporations through which the services are provided.

One of the important terms of the contract was a warranty made by the seller. In it, the seller warranted that the annual billings of “his practice” were $45,000. If the annual billings proved to be less than $45,000, plaintiff, at its option, could renegotiate the price of sale or rescind the contract and recover all amounts paid and expenses incurred in the performance of the contract, and legal expenses incurred in plaintiff’s attempt to recover any such amounts.

Several months after the contract went into effect, plaintiff apparently developed serious problems with the accounting practice it had acquired, among which was the discovery that the annual billings were only $30,000. Plaintiff sent a letter to Swinehart personally and said it was exercising its option to rescind the contract. Swinehart, apparently refused to allow plaintiff to do so and plaintiff brought this action.

In one count of the complaint, plaintiff alleged, among other things, that both defendants had breached the contract warranty that the annual billings were $45,000. (A copy of the contract was attached to the complaint.) Plaintiff sought rescission of the contract, the return of $19,000 plaintiff had paid while the contract was in force, and the recovery of $7,500 in expenses incurred by plaintiff during the time the contract was in force.

In another count in the complaint, plaintiff alleged that defendant Swinehart, on behalf of himself and defendant Capital Services, had knowingly made three false representations to induce plaintiff to enter into the contract. First, Swinehart had told plaintiff that the annual billings were $45,000 when they were only $30,000. Second, Swinehart had told plaintiff that he was a certified public accountant and that Capital Services was performing services as a certified public accounting firm when, in fact, Swinehart was not certified and Capital Services was not licensed to perform services as a certified public accounting firm. Third, Swinehart had told plaintiff that he had performed all of his services to clients in a professional manner when, in fact, the services he had rendered had actually been done in a careless, sloppy, inaccurate, and unprofessional manner, requiring plaintiff to redo audits, tax returns, and other financial documents for a majority of the clients.

Plaintiff alleged that the above fraudulent representations had caused damage to plaintiff’s professional reputation in the amount of $100,000. Plaintiff also sought $250,000 in punitive damages under this count.

The complaint was filed in February 1979. In August 1979, defendants filed their answer denying most of the allegations of plaintiff’s complaint.

On October 26, 1979, plaintiff served defendants’ attorney with a notice of deposition and a request to produce documents for November 12,1979. On November 12, defendants’ counsel notified plaintiff’s counsel that defendant Swinehart could not appear for a deposition or produce documents on that date. Defendants’ counsel said that he would make new arrangements to comply with the discovery request.

By November 20, plaintiff’s counsel had not been contacted by defendants’ counsel to make new arrangements. Plaintiff’s counsel wrote a letter to defendants’ counsel on that date. In the letter, plaintiff’s counsel insisted on compliance with discovery and declared that he believed defendants were intentionally avoiding discovery. Plaintiff’s counsel wrote that, unless defendants agreed to submit to discovery, plaintiff would move for sanctions to compel discovery.

Defendants’ counsel did not respond to the November 20 letter. On November 29, plaintiff’s counsel wrote to defendants’ counsel demanding that arrangements be made for defendants to comply with discovery. Plaintiff’s counsel also wrote that, if a schedule for complying with discovery was not arranged by December 6, plaintiff would seek sanctions in court.

By December 11, defendants still had not taken any steps to comply with discovery. On that date, plaintiff’s counsel served defendants’ counsel with a motion for an order compelling discovery. The notice of motion served on defendants’ counsel stated that a hearing would be held on the motion on December 19.

On December 19, defendants’ counsel failed to appear for the hearing. The trial court entered an order compelling defendants to submit to the requested discovery by January 11, 1980. The court also ordered that a hearing would be held on January 11 to impose sanctions on defendants if defendants failed to submit to discovery by that date.

Also on December 19, plaintiff’s counsel wrote to defendants’ counsel explaining the nature of the order entered by the trial court. Plaintiff’s counsel also served defendants’ counsel with a new notice of deposition and request to produce documents by January 4,1980.

By January 7, 1980, defendants had still failed to take any steps to comply with discovery. On that date, plaintiff’s counsel served defendants’ counsel with a petition for a rule to show cause why defendants should not be held in contempt for failure to abide with discovery. The petition requested a contempt order, or, in the alternative, specific sanctions of an order striking defendants’ answer and entering a judgment of default. The notice of motion accompanying the petition said that the matter was set for hearing on January 11.

On January 11, plaintiff’s counsel received two letters, dated January 8, from defendants’ counsel. The letters essentially said that defendants could not comply with discovery by January 11 but that defendant Swinehart could submit to a deposition after January 18. The letters stated no reason for defendants’ previous failure to comply with discovery.

At the hearing on January 11, defendants’ counsel failed to appear. Plaintiff’s counsel showed the trial court the two letters he had received. The trial court entered an order directing that a rule issue compelling defendants to show cause why they should not be held in contempt. The court set the matter for hearing on January 22. The court indicated that at that hearing it would consider the appropriate sanction to be imposed on defendants if defendants still failed to submit to discovery by that date.

At the hearing on January 22, defendants’ counsel appeared and told the court that defendants would probably not comply with discovery. Defendants’ counsel asked for additional time to attempt to have defendants comply with discovery. The trial court entered an order striking defendants’ answer to the complaint and finding defendants in default, but the court delayed the effect of the order until January 29 to allow defendants’ counsel to attempt to have defendants submit to discovery by that time.

At a hearing held on January 29, defendants’ counsel appeared and said that defendants would not co-operate in the taking of discovery. Because of this, the trial court again entered an order striking defendants’ answer and finding them in default. The trial court ordered plaintiff to submit an itemized schedule of legal services for the assessment of attorney’s fees. The trial court also ordered plaintiff to prove up the allegations of its complaint and set a hearing for March 24 for the presentation of plaintiff’s evidence.

At the hearing held on March 24, no one appeared on behalf of defendants though defendants’ counsel had notice of the hearing. Plaintiff, as its only witness, called George Hoffman to testify. He testified that prior to the making of the contract he had talked to defendant Swinehart, whom he knew well, about purchasing his accounting practice. Swinehart apparently wanted to sell his business and retire to Florida. Hoffman said that Swinehart had represented to him that the annual billings of the practice were $45,000 and Hoffman said he had relied on this statement as an inducement to enter into the contract. Hoffman later discovered that the actual annual billings were less than $30,000.

Hoffman testified that he initially believed that Swinehart was doing business as a sole proprietor but discovered, shortly before the contract was entered into, that the business was done in corporate form. Though the contract seller was named as defendant Capital Services, Hoffman, when he entered into the contract, was relying on Swinehart personally to carry out the contract promises as evidenced by the references in the contract to the seller in the third person masculine — he, him, his, and himself.

Hoffman said that shortly after his company took over Swinehart’s practice, he discovered that many of Swinehart’s clients had not received adequate services when Swinehart was in control. Hoffman found that Swinehart had failed to file timely tax returns on behalf of many of his clients and as a result many of the clients were being investigated by the IRS. Hoffman was required to redo many of the tax returns that Swinehart had filed and redo many of the audits that Swinehart had performed for clients because the audits were inaccurate and done in a careless manner. Hoffman asserted that his firm had spent more than 3,000 hours to perform work that Swinehart should have performed before the sale, and that the time expended was worth at least $7,500. Hoffman testified that many of the clients that he took over were blaming him for the problems that had developed and he had lost business as a result and his reputation was being damaged.

Hoffman said he had paid defendants $19,000 of the purchase price. The amounts were paid by check made out to Capital Services. At the time of the hearing, Capital Services was no longer in business but maintained a bank account. Defendant Swinehart had apparently withdrawn all the payment money from the account because the account showed a balance of less than $1,000.

When asked whether Swinehart had told him that Swinehart was a certified public accountant, Hoffman answered that Swinehart was a certified public accountant.

Based on the above evidence, the trial court, on March 28, 1980, entered judgment for plaintiff on both counts of the complaint. On the rescission and restitution count, the court found that the contract had properly been terminated pursuant to the warranty term of the contract in which the seller warranted that the annual billings were $45,000 and provided that plaintiff could rescind the contract if the annual billings were less than that amount. Under the rescission and restitution count, the trial court found that both defendants were liable under the contract terms and ordered defendants to pay plaintiff $19,000, representing the payments already made, and an additional $7,500 in expenses incurred by plaintiff during the time the contract was in force.

Under the fraud count, the court found that defendants were liable for fraudulent representations that had caused damage to plaintiff’s reputation. The court entered judgment for plaintiff for compensatory damages of $100,000 and punitive damages of $250,000. Additionally, the court ordered defendants to pay plaintiff $3,443 in attorney’s fees incurred as a result of defendants’ refusal to comply with discovery.

Following the entry of judgment, defendants filed a timely motion to vacate. In this motion, defendants asserted that the judgment was contrary to the law because there had been no proof of fraud and defendant Swinehart could not be held personally liable under the contract because he was not a party to the contract. Defendants offered no excuse for their failure to comply with discovery. Defendants made no offer to comply with discovery in the future.

The motion to vacate was denied and this appeal followed.

Opinion

I

Sanction of Default Judgment

The striking of a defendant’s answer and the entry of an order of default are permissible sanctions for a defendant’s refusal to comply with the rules of discovery or orders compelling discovery. (Ill. Rev. Stat. 1979, ch. 110A, par. 219(c)). However, such a drastic punishment as the entry of default judgment is not favored and should only be resorted to when the defendant has shown a deliberate, contumacious, and unwarranted disregard for the rules of discovery or orders compelling discovery. White v. Henrotin Hospital Corp. (1979), 78 Ill. App. 3d 1025, 398 N.E.2d 24; Schwartz v. Moats (1971), 3 Ill. App. 3d 596, 277 N.E.2d 529.

In the present case, defendants ignored repeated requests for discovery and ignored an order of the court compelling discovery. Then, after ignoring the order of the court compelling discovery, defendants were given more time to comply. Finally, when the hearing was held to impose sanctions for defendants’ failure to comply, defendants’ counsel told the court that defendants would not comply. Thus, in the present case, defendants not only deliberately disregarded the rules of discovery and orders compelling discovery, but actually refused to comply despite the court’s giving them every opportunity to do so. Hence, we believe the trial court acted properly within its discretion when it struck defendants’ answer and entered an .order of default as a sanction for defendants’ refusal to comply with discovery.

Denial of Motion to Vacate

Defendants contend that even if the entry of the order of default was proper in the first instance, the trial court should have vacated the order of default because plaintiff would have suffered no hardship by being required to proceed with its case, and defendants, in their motion to vacate, asserted meritorious defenses to the causes of action alleged in the complaint.

Defendants’ argument misses the point. The entry of the order of default resulted from defendants’ refusal to comply with discovery. In order to have the default order set aside, defendants had to come forth, at the very least, with some legitimate excuse for their failure to comply with discovery and show a willingness to comply in the future. (See Schwartz v. Moats (1971), 3 Ill. App. 3d 596, 277 N.E.2d 529.)XIn their motion to vacate, defendants offered no excuse for their previous failure to comply with discovery and did not even offer to comply with discovery in the future. Accordingly, we find the motion to vacate the order of default was properly denied.

II

Though the entry of a default judgment was proper in this case as a matter of procedure because of defendants’ refusal to comply with discovery, defendants have also raised issues concerning whether the judgment entered by the trial court was substantively proper. On appeal from a default judgment that is entered solely on the basis of the allegations of a plaintiff’s complaint, the defendant can still attack that judgment if the complaint failed to state a cause of action. (Roe v. Cook County (1934), 358 Ill. 568, 193 N.E. 472.) Also, if, following the entry of an order of default, the trial court requires plaintiff to present evidence to prove the allegations of the complaint, then a defendant can challenge the default judgment on appeal based on the legal insufficiency of the evidence to sustain the cause of action alleged. See Colonial Penn Insurance Co. v. Tachibana (1977), 53 Ill. App. 3d 981, 369 N.E.2d 177.

In the present case, defendants raise two issues attacking the default judgment. First, defendants allege that the fraud count of the complaint failed to state a cause of action for fraud or, in the alternative, the evidence presented failed to present a prima facie case for fraud and thus the award of $100,000 in compensatory damages for the injury to plaintiff’s reputation and of $250,000 in punitive damages was improper. Second, defendants allege the count of the complaint for rescission and restitution failed to state a cause of action against defendant Swinehart or, in the alternative, plaintiff failed to present sufficient evidence to prove a case for rescission and restitution against defendant Swinehart.

Fraud

Even assuming the complaint stated a cause of action for fraud, we believe that plaintiff failed to present sufficient evidence to sustain the judgment entered as to that count. To sustain an action for fraud based on reliance on misrepresentations made by a defendant, the plaintiff must show: (1) defendant made a false representation of a material fact; (2) defendant, when making the representation, knew the statement was false or made the statement in reckless disregard of the truth; (3) defendant made the statement for the purpose of inducing the plaintiff to do an act; (4) plaintiff acted in reasonable reliance on the statement; and (5) plaintiff suffered injury as a result of his reliance on the statement. See Mother Earth, Ltd. v. Strawberry Camel, Ltd. (1979), 72 Ill. App. 3d 37, 390 N.E.2d 393.

In the present case, plaintiff failed to present evidence on practically all of the elements of its cause of action for fraud. To begin with, one of the misrepresentations that defendant Swinehart allegedly made was that he was a certified public accountant. In its complaint, plaintiff alleged that Swinehart was not certified. During the prove up, however, Hoffman said that Swinehart was a certified public accountant. Thus, based on the evidence, there was no misrepresentation.

Next, plaintiff asserted that Swinehart had told him the practice had $45,000 worth of billings per year. Though plaintiff proved that the billings were only $30,000, plaintiff failed to present any evidence which established a causal connection between the representation of annual billings of $45,000 and the injury done to plaintiff’s reputation, the only alleged injury under the fraud count.

Next, the only possible misrepresentation that may have resulted in plaintiff’s reputation being injured was the statement allegedly made by Swinehart that he had performed his services in a professional manner. The causal connection plaintiff attempted to establish was that the services had not been done in a professional manner and clients were blaming plaintiff for Swinehart’s carelessness and plaintiff was losing clients as a result, and thus, allegedly, plaintiff’s reputation was injured. However, during the prove up, Hoffman never said that Swinehart had told him the services had been rendered in a professional manner. Thus, even assuming Hoffman could have reasonably relied on such a statement, there was no proof that the statement was made. Though it might have been implied from the nature of the contract that Swinehart was required to deliver his practice to plaintiff with all previous services having been rendered in a professional manner, an implied term of a contract cannot be raised to the level of a fraudulent representation.

Finally, the only evidence of damage to plaintiff’s reputation consisted of general statements that many clients were blaming plaintiff for Swinehart’s carelessness and plaintiff had lost some of those clients. Such general statements did not constitute grounds for the entry of a $100,000 judgment, especially considering that the clients plaintiff had lost were clients it intended to lose after the rescission of the contract.

Accordingly, for all the above reasons, we find that plaintiff failed to present sufficient evidence to sustain an action in fraud, and the trial court should have entered judgment against plaintiff under the fraud count. It was improper for the trial court to award plaintiff $100,000 in compensatory damages and $250,000 in punitive damages based on the fraud count of the complaint.

Rescission

Defendant, Capital Services Co., does not challenge the substance of the trial court’s finding on the rescission and restitution count of plaintiff’s complaint as far as it held Capital Services Co. liable. Defendant Swinehart challenges that portion of the judgment as it pertains to Swinehart as an individual. Swinehart asserts that he was not a party to the contract and that the complaint failed to state a cause of action against him personally because there were no allegations justifying the trial court to look beyond the corporate entity and hold Swinehart personally liable for the contract of the corporation. Swinehart also asserts that no evidence was presented to justify a finding of personal liability on the part of Swinehart. We hold that the trial court could have properly found Swinehart personally liable under the rescission count of the complaint.

As previously noted, the contract contained ambiguities. Though the named seller was Capital Services Co., the seller is referred to throughout as “him,” “his” or “himself” and not “it” or “itself.” Many of the promises in the contract had to have been intended by the parties to be promises of Swinehart personally, especially considering that both Hoffman and Swinehart knew at the time the contract was entered into that Capital Services would cease to do business after the contract was executed. At the evidentiary hearing, Hoffman testified that when he signed the contract he was relying on Swinehart to carry out the terms of the contract personally.

Accordingly, based on all the facts presented, we believe the trial court could have found that Swinehart was actually a party to the contract and was intended by the parties to be the one who would perform the promises and warranties contained in the contract and to be jointly liable with the corporation if the terms of the contract were breached.

Conclusion

For the reasons noted, we hold the following:

(1) the entry of judgment against defendants Capital Services Co. and Leland Swinehart on the rescission and restitution count of the complaint is affirmed and Capital Services and Swinehart are jointly and severally liable to plaintiff in the amount of $26,500.
(2) the entry of judgment against defendants on the fraud count which awarded plaintiff $100,000 in compensatory damages and $250,000 in punitive damages is reversed and we direct that judgment be entered for defendants on that count.

Finally, we note that defendants have not challenged the award of attorney’s fees on appeal, and thus we need not determine whether the trial court properly determined the amount of fees.

Affirmed in part, reversed in part.

ROMITI, P. J., and JIGANTI, J., concur.

       Shortly before the filing of the notice of appeal, defendants filed a petition for relief under section 72 of the Civil Practice Act (Ill. Rev. Stat. 1979, ch. 110, par. 72). In this petition, defendants asserted various excuses for their failure to comply with discovery. Defendants have asked us to consider the facts alleged in the petition to determine whether the original judgment was proper. This we cannot do. The basic question before us is whether the original judgment was proper not whether the judgment should be set aside based on a section 72 petition. For us to consider the facts alleged in the section 72 petition to determine whether the original judgment was proper would require us to essentially become a trial court and first determine that the facts alleged are true. At the time the notice of appeal was filed, the trial court had not made any determination on the merits of the section 72 petition, and we cannot assume that the facts alleged in the petition are true before a trial court has even attempted to make such a determination.


author: Mr. JUSTICE GOLDBERG

text:
      In re APPLICATION OF COUNTY COLLECTOR.— (EDWARD J. ROSEWELL, Cook County Treasurer, Collector-Appellee, v. HAROLD S. LEVIN et al., Objectors-Appellants.)
    First District (1st Division)
    Nos. 80-2774, 80-2948, 81-0471, 81-0686 cons.
    Opinion filed November 2, 1981.
    Arvey, Hodes, Costello & Burman, of Chicago (William J. Costello, Eugene L. Griffin, Robert M. Sarnoff, and Jeffrey I. Langer, of counsel), for appellants Harold S. Levin et al. and Phillip Lewis et al.

    Bernard Allen Fried, of Chicago, for appellants Aaron Szydlowicz et al.

    James A. Rooney, of Chicago, for appellant Iver Johnson.
    Levin, Ginsburg & Novoselsky, Ltd., of Chicago (Henry N. Novoselsky and Michael B. Skalka, of counsel), for appellants Milton Collen et al.

    Richard M. Daley, State’s Attorney, of Chicago (Jane Clark Casey and Thomas J. McNulty, Assistant State’s Attorneys, of counsel), for appellee.
   Mr. JUSTICE GOLDBERG

delivered the opinion of the court:

Cook County treasurer and ex-officio county collector Edward J. Rosewell (collector) broúght action for judgment and order of sale against parcels of real property upon which real estate taxes were unpaid for at least five years. Upon motion of the collector, the trial court deleted from the list of lots to be offered for sale various properties owned or controlled by the objectors. The sale of the remaining parcels was confirmed by the trial court. The objectors appeal.

The objectors are all party defendants in pending actions brought by the County Board of Cook County pursuant to section 275 of the Revenue Act (Ill. Rev. Stat. 1979, ch. 120, par. 756). These actions seek collection of allegedly unpaid Cook County real estate taxes from the owners and beneficiaries of land trusts holding parcels of property in Cook County. The real estate taxes upon these parcels were unpaid for five or more years as of July 1980.

There are a number of objectors who joined in the consolidated appeals. The facts are undisputed, and it is agreed that the facts in all of the various consolidated appeals are the same. In addition, there is a stipulation stating the same facts in connection with General No. 81-0686 showing the uniformity of the pertinent facts.

On July 21,1980, the collector filed his application for judgment and order of sale as to all parcels of land located in Cook County upon which the real estate taxes remained unpaid for each of five or more years pursuant to section 235a of the Revenue Act (Ill. Rev. Stat. 1979, ch. 120, par. 716a). The parcels were then to be sold at a public sale commonly known as a scavenger sale. The parcels of land owned or controlled by all of the objectors were included in this application. The application was continued to August 8, 1980, to permit any owner to object to the application. No such objections were filed. On August 8, 1980, the trial court granted judgment as prayed in the application. The sale was ordered to commence on August 11, 1980.

On or about July 30,1980, the State’s Attorney of Cook County wrote to the collector and requested the collector to delete from the scavenger sale parcels owned by the objectors which were the subjects of actions brought earlier to collect delinquent real estate taxes. The collector did so on or about August 8,1980. The properties deleted from the sale included the subject properties of these consolidated actions.

On August 27,1980, the collector filed a notice to amend the order of judgment and sale, seeking to delete formally the subject parcels from the 1980 scavenger sale. Objections were filed by the objectors, who argued the scavenger provisions of the Revenue Act (Ill. Rev. Stat. 1979, ch. 120, par. 716a) were mandatory. The owners also contended the deletion of their properties from the scavenger sale by the collector was arbitrary, capricious and in violation of the Revenue Act.

On September 24,1980, the trial court confirmed the sale of parcels sold between August 11 and September 24,1980. Later that same day, the trial court overruled the objections filed by all objectors and amended the order of August 8 as requested by the collector. The trial court confirmed the sale of all remaining parcels on January 7, 1981. Objections to this confirmation were dismissed on February 23, 1981. The objectors have appealed from these orders.

In this court the objectors urge the provisions of the Revenue Act regarding scavenger sales are mandatory and require an offer for sale of all parcels which are tax delinquent for five or more years; assuming the contrary, the county collector lacked authority to delete any parcels from the scavenger sale by ex parte action; the trial court lacked discretion to confirm a scavenger sale from which certain parcels had been excluded ex parte and the court lacked jurisdiction to grant the collector’s motion to amend the order of sale because the subject of the motion had been included in a prior order for confirmation of the sale. All of the objectors in the consolidated appeals have joined in these contentions. In addition, another group of objectors contend that the State’s Attorney of Cook County, attorney of record for the collector, also represents the County Board of Cook County and there is a conflict of interest between these two clients.

The collector contends the trial court has power to allow him to withhold a parcel from the scavenger sale where an action is on file seeking to enforce personal liability for the full amount of tax upon such parcel; the scavenger provisions of the Revenue Act do not require sale of a parcel so that a pending action may not be pursued; the collector did not violate any court order; the trial court had power to confirm the sale of any parcel for which a bid had been made and the court had jurisdiction to permit the omission of parcels from the scavenger sale after confirmation of the sale of other parcels.

The view which we take of the record before us makes it unnecessary to consider in detail any of the points raised by counsel. In our opinion, the doctrine of stare decisis requires that we reverse the orders appealed from so that scavenger sales of all of the parcels involved in these consolidated appeals may proceed. This result is required by the opinions of this court in In re Application of Rosewell (1981), 93 Ill. App. 3d 1106, 418 N.E.2d 53, and People ex rel. Larson v. Rosewell (1980), 88 Ill. App. 3d 272, 410 N.E.2d 404, appeal denied (1980), 81 Ill. 2d 605.

In Larson, the trial court held that the pertinent provisions of the Revenue Act (Ill. Rev. Stat. 1979, ch. 120, par. 482 et seq.) require scavenger sale of all parcels in which tax delinquency has continued for five years or more without exception of any of such properties. In Larson, in consolidated appeals, the case involved an order by the trial court which dismissed a petition by objectors for a rule upon the county collector to show cause why he should not be held to comply with the pertinent provisions of the Revenue Act and included certain described parcels which had been omitted. The case also involved an attempt by another objector to require the collector to include certain omitted parcels from the judgment and order of sale. Larson, 88 Ill. App. 3d 272, 273.

Thus, the basic issues in the consolidated cases before us and in Larson are identical. Larson has determined that these statutory provisions are mandatory and not directory so that properties which have remained tax delinquent for more than five years must necessarily be sold or offered for sale under the scavenger provisions.

We note additionally that Rosewell specifically eliminates discretionary authority of the collector to delete any parcel from the scavenger sale. This court held that judicial discretion in connection with sales may be exercised only during confirmation proceedings and then limited to cases “where fraud, irregularity, or unfairness in the sale is established.” See Rosewell, 93 Ill. App. 3d 1106, 1109.

One further thought by way of limitation is required. The briefs of the parties contain references to the fact that actions have been filed against the purported owners of the parcels of real estate involved in these consolidated appeals seeking to enforce personal liability for unpaid general taxes. (See Ill. Rev. Stat. 1979, ch. 120, par. 756.) Counsel for the parties alluded to this issue in oral argument. The stipulation between the parties above described states that one of the owners intends to file a motion to dismiss the action against him on the ground that the debt, if any, has been “extinguished by the scavenger sale.”

These actions are not involved in the instant case. This court has been made generally aware of the pendency of these cases, but, as we view the record before us, the merits of the actions are not involved and consequently are not before this court for decision. We wish to make it clear that it is not the intention of this opinion or of any language herein to make any ruling with reference to any of the issues which may ultimately be presented in the disposition of the various actions.

Accordingly, the orders appealed from removing the parcels owned by all objectors herein from scavenger sale are reversed, and the cause is remanded to the trial court with directions that scavenger sales of all of the parcels of real estate herein involved proceed in due course and in accordance with law.

Orders reversed and cause remanded with directions.

CAMPBELL, P. J., and McGLOON, J., concur.


author: Mr. JUSTICE WILSON

text:
    KESSLER, MERCI, AND LOCHNER, INC., Plaintiff-Appellee, v. PIONEER BANK & TRUST COMPANY, et al., Defendants-Appellants.
    First District (5th Division)
    Nos. 80-437, 80-2524 cons.
    Opinion filed October 30, 1981.

      Lawrence D. Swidler & Associates, Ltd., and David Rallo, both of Chicago (Stewart M. Weltman, of counsel), for appellants.
    Gann, McIntosh, Flaherty & Parker, of Chicago (Donald J. Parker, of counsel), for appellee.
   Mr. JUSTICE WILSON

delivered the opinion of the court:

This is an appeal from an order of the trial court requiring the defendant beneficiaries (Beneficiaries) of a land trust to submit to arbitration. Consolidated with this appeal is an appeal from an order dismissing plaintiff and third-party defendant (Kessler) from a third-party complaint brought by six third-party plaintiffs, including Beneficiaries (Developers). On appeal the Beneficiaries and Developers contend that (1) the trial court erred in ruling that the trustee was an agent of the Beneficiaries for purposes of this contract on behalf of the land trust, and (2) the trial court erred in ruling that the Beneficiaries of the land trust were bound by the contract signed by the trustee. The Beneficiaries further assert that it was error to enter a judgment in favor of Kessler without an evidentiary hearing, and the Developers argue that the trial court erred in sustaining Kessler’s motion for dismissal, unverified and unsupported by affidavit. The pertinent facts follow.

On June 2,1978, Kessler filed an unverified complaint for declaratory relief against Pioneer Bank and Trust Company (Pioneer), as trustee, and Armand S. Donian. Donian was one of the beneficiaries of a land trust established at the Pioneer Bank and also the developer with the largest interest in the land trust property. Phillip C. Goldstick, Vera Donian Bezazian and Dorothy Donian Avedisian were the other beneficiaries of the land trust property. Donian and Goldstick negotiated the agreement for architectural services in contemplation of the erection of condominium units on the trust property. This contract was signed on October 2, 1973, and contained an arbitration clause. The complaint was later amended to include all the beneficiaries of the trust. The contract attached to the complaint contained the following provision:

“All claims, disputes and other matters in question arising out of, or relating to this Agreement or the breach thereof shall be decided by arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association then obtaining unless the parties mutually agree otherwise. This Agreement to arbitrate shall be specifically enforceable under the prevailing arbitration law.”

This article was initially crossed out by Donian; however, a typewritten insert on the side of this provision stated that “This article to be included in Agreement” and was initialled by HEK (presumably Howard E. Kessler, president of Kessler). The contract was returned to Goldstick who transmitted it in this form to Pioneer Bank. Pioneer Bank executed the contract with the arbitration clause reinserted pursuant to the letter of direction. The contract contained the following stamped representation:

“All representations of Pioneer Trust and Savings Bank, as trustee, are those of the trustee’s beneficiary only.”

Further, at page three of the document, is another stamp which, as read in the record, states that:

“This document is made by the Pioneer Trust and Savings Bank as trustee and accepted upon the express understanding that the Pioneer Trust and Savings Bank * * ° [illegible material] waived, nor shall the Pioneer Trust and Savings Bank be held personally liable concerning or in consequence of any of the covenants of this document, either expressed or implied.”

Pioneer moved for and was granted dismissal from the proceedings, admitting that the agreement did require it to arbitrate. Donian’s motion to dismiss, alleging that the agreement did not contain his signature, and under Illinois law such a letter of direction could not make a beneficiary personally liable, was denied.

Kessler filed a second amended complaint alleging an agency relationship between the Beneficiaries and Pioneer. The Beneficiaries’ answer contended that under Illinois law there was no agency relationship between the trustee, acting pursuant to a letter of direction, and the Beneficiaries. Their motion to dismiss the amended complaint was denied. '

The trial court predicated its findings and rulings of law upon the pleadings admitted in the record. The pertinent findings indicated that:

(1) the arbitration provision was included in the contract when the Beneficiaries’ attorney submitted it to Pioneer;
(2) Pioneer signed the contract as an agent at the direction of three of the Beneficiaries of the land trust; and
(3) the Beneficiaries accepted the benefits of the architectural services rendered under the contract.

It therefore concluded that:

“1. Where, as here, the trustee has no discretion to manage the trust property independently from the trust beneficiaries even for a term or to the accomplishment of a definite purpose, but acts only as directed by the beneficiaries such ‘Trustee’ is actually only an agent acting under the dominion of a principal.
2. Where, as here, a ‘trustee’ executed a contract for architectural services at the direction of the beneficiaries of his trust the trustee is really an agent whose principal [sic] is the beneficial owners of the trust property, and those beneficiaries are bound by the terms of the agreement as is any other principal who acts through an agent.”

In the parallel litigation, the Developers are seeking indemnity against Kessler, claiming that Kessler is liable to them if they are liable to the purchasers of the condominiums for alleged faulty workmanship in the design and construction of the building. Kessler filed a motion for dismissal on the grounds that the contract provided for arbitration. The Developers responded that the contract Kessler had was with Pioneer Bank and was, therefore, not binding upon them. The trial court granted Kessler’s motion as to each of the six Developers. The Developers then filed a motion for rehearing and reconsideration alleging that (1) Kessler’s motion for dismissal under section 48 of the Civil Practice Act proceeded upon grounds not appearing on the face of the third-party complaint, (2) Kessler’s motion for dismissal was not verified and must be supported by affidavit, (3) Developers, Skokie Construction Co. (Skokie) and LincolnNiles Realty Associates (Lincoln-Niles), were neither Beneficiaries of the Pioneer Trust, nor signatories to the contract, and (4) the trial court erred in holding that the Beneficiaries were bound to the provisions of the contract with Kessler. This motion was denied.

Opinion

The question before us in both appeals is whether the pleadings and other documents allege sufficient facts for the trial court to make a determination that the trustee acted as an agent of the Beneficiaries in the execution of the architectural agreement, thus binding them to the terms of the contract.

Generally, a trustee, as holder of legal title of the trust estate, deals with it as principal and is personally liable on his contract. (In re Estate of Conover (1938), 295 Ill. App. 443, 14 N.E.2d 980.) He can protect himself from personal liability on the contract by stipulating that he is not to be personally liable and that the other party is to look solely to the trust estate. (Barkhausen v. Continental Illinois National Bank & Trust Co. (1954), 3 Ill. 2d 254, 120 N.E.2d 649; Schumann-Heink v. Folsom (1927), 328 Ill. 321, 159 N.E. 250.) An agent does not have title to the property of the principal and can subject his principal to liability if he is acting within the scope of his authority. (Merchants National Bank v. Frazier (1946), 329 Ill. App. 191, 67 N.E.2d 611.) The distinction between a trustee and an agent is not only title, but control of the property. Where the trustee is given full control in the management of the business of the trust, then the beneficiaries have no personal liability. Where, however, the beneficiaries retain control over the trustee and the management of the business in relation thereto, a different result is warranted. (Merchants National Bank; In re Estate of Conover.) The trustee is regarded as the agent of the beneficiaries and they will be liable upon his contracts. (2 Scott on Trusts §274.) A power of direction alone, however, will not result in the creation of an agency. Barkhausen v. Continental Illinois National Bank & Trust Co.; Gallagher & Speck v. Chicago Title & Trust Co. (1925), 238 Ill. App. 39.

Under these applicable principles of law, Pioneer, the trustee in the pending case, would not become the agent of the Beneficiaries acting pursuant to the power of direction alone. There must be sufficient other facts in the pleadings which affirmatively show that the Beneficiaries retained “control” over Pioneer and management of the trust estate. An examination of the record, which includes the pleadings and memoranda of law submitted by counsel, indicates that Donian, one of the Beneficiaries, functioned as the primary developer of the property in question. Moreover, Donian, as agent of the Beneficiaries, negotiated the agreement with Kessler prior to its execution by Pioneer. When the arbitration clause was reinserted in the agreement, it was transmitted in that form to Pioneer by Goldstick (another Beneficiary), and Pioneer was directed by three of the Beneficiaries to sign the agreement. On these facts there is a sufficient basis for the court to conclude that Pioneer was the agent of the Beneficiaries. Further, this determination is supported by Pioneer’s stamped provision in the agreement concerning its capacity, which states that “All representations of Pioneer Trust and Savings Bank, as trustee, are those of the trustee’s beneficiary only.” This statement would appear to acknowledge the Beneficiaries’ control and management of the trust res. We, therefore, believe that under the facts of this case, Pioneer was the agent of the Beneficiaries and the Beneficiaries are bound by the contract terms.

There was no necessity for an evidentiary hearing as there were no genuine issues of material fact, only a dispute as to the application of legal principles. The Beneficiaries had an opportunity to assert any matters which would negate their control and management of the trust property. Having failed to avail themselves of this opportunity to raise a material fact, they cannot now argue that an evidentiary hearing was necessary. The trial court was thus empowered, based on the record before it, to enter judgment in favor of Kessler. Ill. Rev. Stat. 1979, ch. 110, par. 57.1; Mid-Town Petroleum, Inc. v. Dine (1979), 72 Ill. App. 3d 296, 390 N.E.2d 428; see also Yakupcin v. Baker (1980), 83 Ill. App. 3d 624, 404 N.E.2d 869.

We distinguish Barkhausen v. Continental Illinois National Bank & Trust Co. from the pending matter. In Barkhausen, the beneficiaries sought a judgment that they were not personally liable on a mortgage that their trustee had assumed. They had directed their trustee in a written letter of direction to acquire property and assume the covenants of the mortgagor. Upon defaults under the covenants, Continental Bank notified them that they would ultimately be responsible for the entire amount of the mortgage indebtedness. In a declaratory judgment action, the trial court awarded summary judgment for them, holding there was no personal liability on their part. The appellate court reversed, predicating its determination upon three instruments: (1) a mortgage indenture; (2) the standard land trust agreement; and (3) an agreement, executed by the trustee, assuming the mortgage. The supreme court reversed because the evidence in the record before it demonstrated that the beneficiaries never contemplated assuming personal liability. The bondholders were repeatedly advised, in the negotiations for the sale, that the beneficiaries were not assuming any responsibility for the mortgage indebtedness, and in fact, the offer of purchase expressly specified that the sale was subject to the underlying mortgage without any assumption of personal liability. In the pending matter, we are not speaking of a pre-existing debt Pioneer was directed to assume, but one in which the Beneficiaries were affirmatively involved. Donian and Goldstick (Beneficiaries) were partners in a development partnership agreement concerning the property. Both of them were involved in the agreement for architectural services prior to Goldstick transmitting it to the trustee with the arbitration clause reinserted. Further, a portion of the architectural fees in question was paid by Donian, not Pioneer. While it is true that we do not have the land trust agreement before us, the record reflects that the Beneficiaries implicitly made themselves liable because of their management and control of Pioneer and the trust property.

Similarly, we distinguish Gallagher & Speck v. Chicago Title & Trust, where the court refused to hold the trustee liable as a principal on its beneficiary contract because the evidence did not warrant such. In that case, there was no evidence that the trustee had anything to do with the contract or knew of its existence, or even knew that any work was being done by the plaintiff on its beneficiary’s order or otherwise, unlike the situation in our instant case. Further, there was no subsequent ratification by defendant of the beneficiary’s contract or any acceptance of the benefits thereof, again unlike the situation in the instant case, where the Beneficiaries accepted the benefits of the architectural services in the development of their condominiums.

Lastly, the Developers in their appeal contend that the trial court erred in sustaining Kessler’s motion for dismissal. Specifically, the Developers assert that the Kessler’s motion made pursuant to section 48 of the Civil Practice Act (Ill. Rev. Stat. 1979, ch. 110, par. 48) was not based on grounds that appeared on the face of the third-party complaint and so must be supported by affidavit. Further, Skokie and Lincoln-Niles were neither signatories to the agreement between Pioneer and Kessler, nor beneficiaries of the Pioneer Trust, and so should be allowed to proceed with the third-party complaint against Kessler.

The Developers consist of Skokie, Lincoln-Niles, Pioneer Trust and Savings Bank, Armand S. Donian, Dorothy Donian Avedisian and Vera Donian Bezazian. The trustee (Pioneer) has aleady acknowledged its obligation to arbitrate. The third-party complaint included an attached counterclaim filed by the individual owners of Tiffany South Condominium Development against the Developers for negligent design and construction of their condominium property. In their counterclaim, the individual owners assert that Armand, Dorothy and Vera were beneficiaries of the Pioneer Trust and that Skokie and Lincoln-Niles are owned, directed and controlled by the named Beneficiaries of some of them. The Kessler motion stated that it had a contractual relationship with the Developers and that this relationship is governed by the contract, which prescribes arbitration.

We think it is important that the Developers are either Beneficiaries of the Pioneer Trust or are businesses operated by all or some of the Beneficiaries. The intricacies of these relationships make the Beneficiaries and Developers almost indistinguishable for purposes of this appeal. We also think it is significant that in the first appeal the Beneficiaries assert that they were not signatories to the agreement between their trustee and Kessler and so have no obligations under the contract, yet in the consolidated appeal assert their right to sue Kessler directly, as beneficiaries of the contract.

Our courts have held that a beneficiary cannot be allowed to accept the benefits of the land trust form and still deal with the trust property as if no trust existed. (Rizakos v. Kekos (1977), 56 Ill. App. 3d 404, 371 N.E.2d 896.) In effect the Beneficiaries-Developers are asking us to recognize the legal entity they have adopted in the first appeal, but to disregard it for purposes of this consolidated appeal. Parties “cannot be permitted to adopt a legal entity and be blessed with both a sword and a shield depending upon the varying facts and circumstances.” In re Application of County Treasurer (1969), 113 Ill. App. 2d 50, 57, 251 N.E.2d 757.

The third-party complaint does contain the grounds for Kessler’s motion to dismiss, and need not be supported by affidavit. It includes the counterclaim against the Beneficiaries-Developers, and Kessler has asserted that it has a contractual relationship with the Beneficiaries-Developers. The trial court properly found that the trustee was the agent of the Beneficiaries, and thus they are bound by the contract terms. Further, third-party beneficiaries of a contract have no greater rights than the party they wish to claim under (Mark v. New York Stock Exchange (1978), 58 Ill. App. 3d 657, 374 N.E.2d 1037), and thus Skokie and LincolnNiles must necessarily look to the contract terms to determine their rights.

The Beneficiaries and Developers have filed a motion for summary reversal in which they contend that in the matter of Gistenson v. Donian et al., now pending in the Chancery Division, Kessler did not raise the arbitration clause as a defense to the court’s jurisdiction. They assert that the filing of an Answer and Counterclaim waived Kessler’s right to arbitrate and acknowledges the jurisdiction of the court. We disagree. The reliance on Gateway Drywall & Decorating, Inc. v. Village Construction Co. (1979), 76 Ill. App. 3d 812, 395 N.E.2d 613, is misplaced. In Gateway Drywall, the contract provided for arbitration of disputes, however, defendants filed answers to the complaint and did not assert their right to arbitration until after their motion for a continuance of the second trial date had been denied. The court concluded that defendants’ conduct in the action amounted to a waiver.

In the pending case, Kessler specifically set up the arbitration agreement as an affirmative defense and counterclaimed, in the alternative, if the court found that the parties to the action were not subject to the arbitration agreement, that an action at law be allowed for damages for failure to pay for the architectural services. Kessler’s conduct has not been inconsistent with the arbitration clause (Godare v. Sterling Steel Casting Co. (1981), 96 Ill. App. 3d 601, 421 N.E.2d 925), and Developers’ motion for summary reversal must be denied.

We believe our holdings here are consistent with general land trust property law. We have determined only that the parties involved in these appeals are obligated by the contract provisions to arbitrate their claims, based on the circumstances of this case, to determine their respective liabilities, if any. For the foregoing reasons, the orders of the trial court are affirmed.

Affirmed.

SULLIVAN, P. J., and LORENZ, J„ concur.


author: Mr. JUSTICE REINHARD

text:
    LARRY JENNINGS et al., Plaintiffs, v. WESSEL CONSTRUCTION COMPANY, INC., et al., Defendants.—(TER-JAC CONSTRUCTION COMPANY, INC., Defendant and Third-Party Plaintiff-Appellant, v. THE UNITED CITY OF THE VILLAGE OF YORKVILLE, Third-Party DefendantAppellee.)
    Second District
    No. 81-19
    Opinion filed November 9, 1981.
    James M. Wilson, of Ingemunson and Wilson, of Yorkville, for appellant.
    Fred H. Dickson, of Goldsmith, Thelin, Schiller and Dickson, of Aurora, for appellee.
   Mr. JUSTICE REINHARD

delivered the opinion of the court:

Plaintiffs Larry and Peggy Jennings brought this suit against defendant Wessel Construction Company, Inc. (Wessel), and defendant Ter-Jac Construction Company, Inc. (Ter-Jac), for damages resulting from defects in the construction of their house and in the installation of the sewer system joining their house to the system of the city of Yorkville. Ter-Jac brought a third-party action against the United City of the Village of Yorkville (Yorkville), third-party defendant, alleging that Yorkville had assumed control of the sewer system and was therefore liable for repair of any defects in the system. In a bench trial the court below found for the Jennings and against both defendants, Wessel and Ter-Jac, in the original suit and awarded $2,862.50 as damages for the repair of the sewer line. In the third-party action, the court found for the third-party defendant Yorkville. The only appeal taken is by Ter-Jac on the judgment rendered against it in its third-party claim against Yorkville. The issue raised on appeal is whether upon the adoption and acceptance of the sewer system by Yorkville it became liable to Ter-Jac for the subsequent cost of repair of that system.

In late 1969 or early 1970, Ter-Jac approached the municipal authorities of Yorkville for the purpose of annexing some property to Yorkville and developing a shopping center and residential subdivision, known as Countryside, thereon. Jack Purcell, president of Ter-Jac, retained several professional firms to assist in the project, including the consulting engineers for Yorkville, Walter Deuchler and Associates. Walter Deuchler made full disclosure to both Ter-Jac and Yorkville of its responsibilities to each party and accepted employment by both parties. Pursuant to this dual employment, Walter Deuchler and Associates proceeded to prepare the engineering drawings and specifications for the improvements in the subdivision, including the sanitary sewer system. Walter Deuchler also prepared the Environmental Protection Agency (EPA) permit application.

Ter-Jac and Yorkville agreed that upon completion of the public improvements, and in particular the sanitary sewer system, Yorkville would accept, own and operate all improvements located within the boundaries of the streets. It is not clear whether this agreement was in writing or not and no copy of it is found in the record. It was Yorkville’s policy to be responsible for repairs in the sewer system which occurred in the street after acceptance, but the property owner would be responsible for repairs to the sewer line on his own property.

Before accepting the sewer system, Yorkville inspected the entire system by lowering a television camera into the system to check for faults. However, this method does not allow the spurs off to the homes, but under the street area, to be inspected. It appears that the camera cannot maneuver those turns. The sanitary sewer system was accepted by York-ville in a letter to Ter-Jac dated September 21,1973.

In May 1978, Wessel purchased about 25 lots in the Countryside subdivision from Ter-Jac. Thereafter, Wessel constructed houses on these lots, particularly on the lot located at 103 E. Countryside Drive, which was ultimately sold to Larry and Peggy Jennings, plaintiffs, in April 1979.

Shortly after the Jennings moved into the house, they began experiencing problems with the sewer system. They also noticed a sagging roof, a problem which does not pertain to this appeal. They contacted both Wessel and Yorkville to correct the sewer problem, but neither were able to find the source of the problem. Finally, the Jennings themselves hired Ken Swanson, a plumber and an excavator, to locate the problem. He dug at the edge of the Jennings’ yard and approximately four feet into the street area before he discovered a crushed sewer tile which was causing the backups.

This crushed tile had not been discovered until the Jennings’ problem arose. It was in a spur leading from the main sewer to the connection with the Jennings’ house and had not been in use from the time of construction in the early 1970’s until the Jennings began using their facilities when they moved into the house. There are two theories concerning how the tile was crushed. Ken Swanson believed that a large rock had crushed the tile, but no rock large enough was found during the excavation. The other theory, maintained by another sewer contractor who was present at the excavation, is that a tiny hairline fracture existed in the tile when it was laid during construction and the pressure from the earth around it caused the tile to crumble.

The Jennings paid Mr. Swanson for his work and subsequently brought suit against Wessel for breach of implied warranty of habitability for both the defects in the roof and in the sewer connection and against Ter-Jac for negligence in construction of the sewer system. Ter-Jac then filed a third-party complaint against Yorkville alleging that Yorkville was liable for the house connection repair since it had accepted control of the sewer system six years prior to the suit. Ter-Jac based its third-party complaint on the fact that Yorkville had inspected and accepted the sewer system thereby assuming the care, custody, and control of the sewer system, and thus releasing Ter-Jac from any liability.

At the close of the bench trial, the court specifically found that third-party defendant, Yorkville, was not the principal for the defendant, third-party plaintiff, Ter-Jac, in the construction of the sewer lines. The court also found that Ter-Jac was guilty of negligence in the construction of the sewer lines and as the direct and proximate cause of this negligence the plaintiffs, the Jennings, were damaged. The trial court also found against defendant Wessel on a breach of warranty of habitability for damage incurred by the broken sewer line, but found for Wessel as to the defect in the roof. The damages for repair of the sewer system were found to be $2,862.50. The trial court also found that Yorkville had been negligent in not inspecting the sewer system for five years or immediately prior to issuing the occupancy permits, but that the evidence was not sufficient to establish said negligence was the cause of the Jennings’ damage.

The essence of Ter-Jac’s contention on appeal, as we perceive it, is that upon completion of the sewer system, Yorkville inspected and then accepted ownership of it and all other improvements located within the boundaries of the street; that Yorkville would maintain and repair the sewer system; that if it was necessary to repair any portion of the sewer system under the street, that Yorkville would be responsible for it; and that since the trial court also found Yorkville to have been negligent, Yorkville was liable for the cost of repairs paid by the Jennings. Ter-Jac does not assert that any written indemnity agreement existed between it and Yorkville, nor does it base its third-party claim on an implied indemnity theory.

The whole basis of Ter-Jac’s appeal is that Yorkville alone is liable to the Jennings because it accepted ownership of the sewer system and York-ville’s policy of being responsible for repairs to the sewer system within the street. Yet Ter-Jac has not appealed the judgment for the Jennings, and against it, in the original suit which was based upon Ter-Jac’s negligent construction of the sewer system. It is well established that a third-party complainant cannot tender a new defendant to the plaintiff. (Muhlbauer v. Kruzel (1968), 39 Ill. 2d 226, 230, 234 N.E.2d 790; Vassolo v. Comet Industries, Inc. (1975), 35 Ill. App. 3d 41, 47, 341 N.E.2d 54.) Simply stated, this is exactly what Ter-Jac is attempting to do. Ter-Jac argues that when Yorkville accepted the sewer system, it was relieved of any liability for defects in the sewer system. To the extent that Ter-Jac is attempting to use section 25(2) of the Civil Practice Act (Ill. Rev. Stat. 1979, ch. 110, par. 25(2)) as a device for tendering Yorkville as a new defendant directly to the Jennings, Ter-Jac is clearly exceeding the scope of that section. Any cause of action which Ter-Jac has against Yorkville must be based upon a legal theory entitling it to recover against Yorkville.

Ter-Jac has cited section 9 — 2—112 of the Illinois Municipal Code (Ill. Rev. Stat. 1979, ch. 24, par. 9 — 2—112) in support of its theory that Yorkville is liable to it. That section states, inter alia:

“The acceptance by the board [of local improvements] of any improvement shall be conclusive in the proceeding to make the assessment, and in all proceedings to collect the assessment, or installments thereof, on all persons and property assessed therefor, that the work has been performed substantially according to the requirements of the ordinance therefor. But if any property owner is injured by any failure so to construct the improvement, or suffers any pecuniary loss thereby, he may recover the amount of the injury in a civil action against the municipality making the improvement, if the action is commenced within one year from the date of the acceptance of the work by the board of local improvements.”

Ter-Jac contends that in this section “the legislature has seen fit to place a property owner’s sufferance of pecuniary loss caused by public improvements upon the municipality which has accepted the improvements and which collects assessments from the public’s use of those improvements.” What Ter-Jac fails to recognize is that the statute pertains to a property owner’s right to collect from the municipality “within one year from the date of the acceptance of the work by the board of local improvements.” (Ill. Rev. Stat. 1979, ch. 24, par. 9 — 2—112.) In the case at bar, the Jennings clearly did not bring suit against Yorkville. Further, this statute does not pertain to the situation presented by Ter-Jac, where a pre-existing sewer is faulty, but to suits by a property owner against the municipality where the improvement upon which an assessment has been levied is faulty. (People ex rel. Thompson v. Gage (1908), 233 Ill. 447, 84 N.E. 616; Price v. Board of Local Improvements (1914), 187 Ill. App. 629, aff'd (1914), 266 Ill. 299, 107 N.E. 611.) That is not the case here, and the statute obviously does not apply.

In further support of its claim against Yorkville, Ter-Jac relies upon a statement in 9 Ill. L. & Prac. Cities, Villages & Other Municipal Corporations §554 (1954), which reads as follows:

“A municipal corporation is not liable for negligence in the construction or maintenance of a sewer or drain unless such sewer or drain has been constructed or adopted by the municipal corporation.”

Assuming that to be a correct proposition of law, this certainly cannot be so broadly construed to support a claim by Ter-Jac against Yorkville. Moreover, a case relied upon by Ter-Jac in its brief in support of the above-quoted proposition, Burford v. Village of La Grange (1967), 90 Ill. App. 2d 210, 234 N.E.2d 120, is also a suit by a property owner directly against a municipality. Under the pleadings and facts presented here, Ter-Jac has failed to show that it can recover against Yorkville.

Forjhe foregoing reasons, the judgment of the trial court is affirmed.

Affirmed.

VAN DEUSEN and UNVERZAGT, JJ., concur.